There are already warrants on Bitcoin, but other investment products could follow soon. Before that, however, important questions would have to be clarified.
The mills of financial supervision grind slowly, but they grind: For years, the American financial supervisory authority SEC has been dealing with Bitcoin and financial products based on it, such as funds. Other questions are also being clarified: What is Bitcoin actually and why has it attracted so many traders? Digital currency or a new digital asset class? Only when these questions have been clarified can corresponding investment products be offered. Bitcoin has attracted a lot of people for different reasons, a big industry for BTC is gambling.
Bitcoin is listed in the United States as a kind of commodity. That’s why the CFTC is responsible for Bitcoin, although it usually deals with financial products such as gold or oil. But it was also she who gave the green light for futures on Bitcoin. These warrants are used to bet on future developments, such as rising or falling prices. For example, they are traded on the Chicago Mercantile Exchange (CME) or the Chicago Board Options Exchange (CBOE).
The CME has always been known for offering futures contracts on offside assets, such as pork bellies or wood. It was also the exchange that offered weather derivatives for the first time. The challenge with the warrants on Bitcoin was for a long time that there was no „the“ Bitcoin price. The prices of individual trading exchanges or synthetic price indices of financial agencies such as Bloomberg are used.
Price formation is too intransparent
And this is exactly where the problem of Bitcoin funds lies. Pricing is too intransparent, which is why funds have repeatedly been rejected. However, these are not approved by the CFTC, but are the responsibility of another supervisory authority, namely the SEC. The best-known victim was recently an exchange-traded index fund (ETF) on Bitcoin, which „Pro Shares“ wanted to offer. Its ETF would have been based on Bitcoin warrants, not real Bitcoin.
The SEC, the Securities and Exchange Commission, justified its refusal by stating that neither CME nor CBOE could provide sufficient information on the identity of the market participants involved in the unregulated spot and derivatives markets. According to the SEC, however, this is precisely where a significant part of trading would take place. In addition, a large part of trading would take place on „unregulated overseas trading venues“ and the Bitcoin option markets would not be of decisive size. The ETF of the active Winklevoss twins was rejected because the CBOE could not prove that its underlying market –
Bitcoin – was safe from manipulation
The argument is therefore always clear: the market must finally become more transparent. Therefore also a fund is calculated very large chances. The provider Vaneck would like to launch a fund, but in contrast to the previous ones he would like to launch a real one.
- This means that it is no longer just an index that is mapped, but „Van Eck“ in this case actually physically holds Bitcoin. This would eliminate many of the SEC’s arguments.
- Small investors should be protected by the fact that the purchase price in Vaneck’s Bitcoin product is 25 Bitcoin – currently around 200,000 dollars.
- Currently, a total of nine funds are awaiting SEC approval.
- A deadline to answer open questions was recently met overtime.
- At the end of the year or beginning of next year the first Bitcoin fund could then start.