Fundstrat Tom Lee: Current Bitcoin Market too Small to Keep Up with ETF Market Demand

Cryptocurrency and especially Bitcoin investors have long been arguing in favor of an exchange-traded fund (ETF) from the regulators, but up until now, not a single application (the last rejection being that of Bitwise) has been approved by the United States Security and Exchange Commission (SEC). These investors believe that an ETF would lead to a large inflow of capital into the market and give it a much wider outreach.

But, looking at the rejections of the applications by the SEC it does not look like regulators believe its the right time for the cryptocurrency market to have its own fund.

Recently, Thomas Lee of Fundstrat Global Advisors came up with his reasoning behind why the crypto market does not need an ETF at present. Lee said that the cryptocurrency market is not big enough to handle the demand for ETF. He said the present cryptocurrency market needs to be 18 times its current value to handle the ETF demand. Lee said,

“If you’re involved in crypto, the SEC can look like an obstacle,” 

“They’re establishing protections for individuals and right now it’s not convenient for the industry, but if the SEC is someone that people trust to protect them, that’s how you get the mainstream willing to get involved in crypto. Institutions aren’t going to touch crypto if they think the SEC isn’t doing a good job,”

As per a report in Bloomberg, Lee claimed that only when Bitcoin reaches a value of $150,000 to cope up with the daily demand of an ETF. Lee’s comments came during the Blockshow conference in Singapore.

The SEC’s Concern

Bitwise was the latest exchange whose application for a Bitcoin Exchange Traded Fund was pending before the SEC which like every other previous application was rejected as well. However SEC like before responded with an 112-page reply on why the application was rejected. SEC’s main concern lies towards market manipulation which they believed would be a concern given the small liquidity of the market.

Many analysts claimed that the rejection was a clear sign that the crypto market is still years away from getting an ETF. Todd Rosenbluth, Director of Mutual & Exchange Traded Fund Research of CFRA explained that the ETF is not the issue, it’s the value of the underlying asset. He said,

“It’s not the wrapper, it’s not the ETF product that’s the concern, it’s the underlying asset that the SEC is worried about from a fraud standpoint. They don’t want to pull off that band-aid too quickly.”

Lee was right to point out that Bitcoin needs to have much higher liquidity almost 18 times its present value and trade at a value of around $150,000 to attain the level of liquidity required to meet the demands for an ETF. However, looking at the present price which is hovering around the $9,000 mark and it’s all-time high of near $20k it would be highly speculative to think about a $100,0000+ trading value.

However, crypto trader and analyst PlanB who has been in the limelight recently for his stock-to-flow chart believe looking at the scarcity factor, the $100,000 price point is achievable.

Bitcoin is only behind gold in terms of stock-to-flow value and the chart predicts that the next bull run could start after the block reward halving scheduled in the first quarter of 2020.

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Author: Rebecca Asseh

Thomas Lee: Bitcoin’s Price Needs To Surpass $150,000 USD to Be Liquid Enough for BTC ETF

People are talking about the so-awaited Bitcoin exchange-traded fund (ETF) for quite a lot of time. However, according to Tom Lee, the co-founder of Fundstrat, Bitcoin is not liquid at the moment, so there is simply no way the ETF could be successfully created.

Lee argues that the price of BTC would need to be at least $150,000 USD for the market to have enough liquidity. Only this would make the ETF possible. This is basically the main reason why we’ll not have the ETF this year. With a market under $200 billion USD, the market is not very liquid at the moment.

The ETF would basically create what Tom Lee describes as a major demand imbalance. This could turn the whole idea into something unfeasible. Also, the U. S. Securities and Exchange Commission (SEC) will probably not want to have its image linked to the dangerous project, which is why it generally just postpones it.

Only after Bitcoin would not be so small anymore that it would be the kind of asset that generally can have an ETF. It is because of this that people, in Lee’s opinion, should be tempering their expectations a bit.

He affirmed that the gold ETF was only approved in 2003 and gold is a very old asset. These developments simply don’t happen overnight, which is why it is important to be very patient and realistic when dealing with them.

If we take what Tom Lee is saying as the truth, Bitcoin would have to really jump in price for the ETF to happen anytime soon. These days, traders are still optimistic, but many of them are believing that prices will increase tenfold this year, though, so it may take a while.

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Author: Silvia A

Bitcoin ETF Frontrunners Still Face Uphill Battle in Gaining SEC Approval

It has been a long road to haul for  the Bitcoin exchange-traded fund (ETF) and it looks as if we’re still far from gaining approval. After years of delays and several proposals that seemed as if they would get traction, only to end up being rejected, the Bitcoin ETF advocates continue their struggle.

A recent Bloomberg article talked about how hard the process has been. Bitcoin is acting like a roller coaster and even the most trustworthy companies that try to convince the U. S. Securities and Exchange Commission (SEC) to approve the asset are still failing.

According to James Seyffart, an intelligence analyst at Bloomberg, the SEC is too concerned about market manipulation to approve the ETF right now. Over 20 crypto companies have tried it and no one has succeeded because the SEC looks at the market and doesn’t trust what we have right now.

The crypto market also has several hacks and scandals happening every month, so combined with acute price swings, more traditional regulators are simply too afraid to approve something that can make people gain and lose money so swiftly.

It is undeniable that the market is improving and becoming more regulated, but the chairman of the SEC, Jay Clayton, is adamant about his concerns right now.

Instead of trying to get a killer proposal, the advocates of the Bitcoin ETF need to work on curb market manipulation instead. With such a high rate of manipulation, it is unlikely that we’ll see the ETF approved for now.

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Author: Silvia A

VanEck/SolidX to Launch Limited Option Bitcoin ETFs for “Qualified Institutional Investors” on Sept 5

VanEck Securities and SolidX Management announced plans to launch an institutional-grade Bitcoin exchange-traded funds (ETF) for accredited institutions such as hedge funds, banks, etc. The Bitcoin ETF will not be available to retail investors yet.

The Rule 144A Exemption

The Securities Exchange Service Commission (SEC) postponed the decision to approve VanEck/SolidX Bitcoin ETFs hence the latest use of an exemption Rule 144A law that allows sale to ‘qualified institutional buyers’. A press release from the firms confirmed that the Bitcoin ETFs will finally be issued out – albeit with limited options – starting this Thursday.

“Rule 144A modifies the Securities and Exchange Commission (SEC) restrictions on trades of privately placed securities so that these investments can be traded among qualified institutional buyers, and with shorter holding periods—six months or a year, rather than the customary two-year period.”

The companies will use SEC’s Rule 144A exemption to sell their shares in the Bitcoin Trust which in turn exposes them to the ETF. Only a select group of companies will be eligible to participate in the ETF sale, but not retailers.

A Hope for Approval?

The new asset class becomes the first-ever institutional-grade asset providing “exposure to BTC and enabling a standard ETF creation-and-redemption process.” This will increase the liquidity of Bitcoin across the board offering qualified institutions a physically-backed Bitcoin asset product available in traditional markets and brokerages.

The director of digital asset strategies at VanEck/MVIS, Gabor Gurbacs is looking forward to success of the product as they await on the decision of the SEC. He said,

“This Qualified Institutional Buyers (QIBs) only 144A Bitcoin product may pave the way for institutional Bitcoin adoption and showcase that an appropriately regulated ETF structure can work in practice.”

Daniel H. Gallancy, CEO of SolidX, shared similar sentiments and looks at a bright future for the product. He commented,

“We view the product as an exciting next step for SolidX and VanEck in our partnership as we work to bring institutional-quality crypto asset products to the marketplace.”

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Author: Lujan Odera