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Will Traders "Sell the News" if a Bitcoin ETF Is Approved in the United States?

source-logo  coincodex.com 11 October 2021 13:19, UTC

Key highlights:

  • U.S. regulators still haven't approved a Bitcoin ETF, but investors are becoming more optimistic on the topic
  • Pantera Capital CEO Dan Morehead says that a Bitcoin ETF approval in the U.S. wouldn't necessarily have a positive influence on the Bitcoin price
  • Morehead highlighted the launch of Bitcoin futures on the CME and Coinbase's listing on NASDAQ as two highly anticipated events that were followed by sell-offs

In the United States market, a Bitcoin-based ETF (exchange-traded fund) is not yet available to investors. ETFs are a type of investment fund that’s traded on stock exchanges. ETFs are popular because they can provide diversified exposure, are priced in real-time and have much lower fees than actively-managed funds. 

Multiple companies have submitted their Bitcoin ETF proposals to U.S. securities regulator SEC (Securities and Exchange Commission), but the agency hasn’t approved any Bitcoin ETF proposals so far. Recent comments made by SEC commissioner Gary Gensler indicate that the agency would be more inclined to approve a Bitcoin ETF that tracks the Bitcoin futures contracts on the CME exchange rather than a Bitcoin ETF that tracks the price of Bitcoin on spot exchanges. Prospective Bitcoin ETF issuers like ProShares, Invesco and VanEck have responded to Gensler’s comments and submitted filings to list ETFs tracking Bitcoin futures contracts.

A Bitcoin ETF coming to the U.S. market is seen as a very bullish scenario by most cryptocurrency investors. It would open up a new way of investing in Bitcoin that would be accessible even to investors who prefer making their investments through the traditional market infrastructure and might not be comfortable with using cryptocurrency exchanges and wallets.

Would a Bitcoin ETF approval be a "sell the news" event?

However, the short-term impact of the SEC approving a Bitcoin ETF could be negative for the Bitcoin price. Dan Morehead, the CEO of cryptocurrency-focused hedge fund Pantera Capital, recently said that a Bitcoin ETF approval in the U.S. could be a “buy the rumor, sell the fact” event.

In a post published on October 6, Morehead pointed out two past examples of events that were highly anticipated by Bitcoin investors, and were followed by deep price corrections. The first such event was the launch of Bitcoin futures trading on the CFTC-regulated CME exchange, which essentially marked the top of the 2017 Bitcoin bull market. The second event highlighted by Morehead was Coinbase’s listing on the NASDAQ, which caused Bitcoin to reach its current all-time high of about $64,800 on April 14. Following this all-time high, the Bitcoin market corrected heavily, and bottomed out at about $30,000 in July. 

Morehead concluded his argument by saying that a Bitcoin ETF getting approved might be an opportunity to “take some chips off the table”.

“Will someone please remind the day before the bitcoin ETF officially launches?  I might want to take some chips off the table.”

coincodex.com