US SEC Likely to Delay Bitcoin Futures ETFs Until 2022: CFRA Investment Research Firm

Cryptocurrency investors may have to wait longer for an exchange-traded fund that is directly tied to physical cryptocurrency or its futures contracts, according to Todd Rosenbluth, senior director of the ETF and mutual research company CFRS.

Speaking in an interview with CNBC’s ETF Edge on Tuesday, October 12, Rosenbluth disclosed that although a Bitcoin futures product is likely to be approved first by the SEC, the current clouded regulatory climate could cause further delays.

“We think we’re more likely to see a bitcoin futures ETF first,” 

More than 18 firms are still waiting to hear whether their respective filings for Bitcoin-based ETFs will progress to the public markets. 

Rosenbluth explained that the SEC could be waiting for a clearer regulatory environment that would enable all of such crypto EFT products to meet their goals and therefore approve all the products at the same time to avoid dealing with “first-movers” advantage.  

“It’s possible we think it’s likely — that we’re going to see a delay of a Bitcoin futures ETF until 2022 until the regulatory environment is more clear,” Rosenbluth stated.

Meanwhile, Jan van Eck, the CEO of Van Eck Associates, was also part of the CNBC interview and revealed that that the major concern for the SEC is about the potential for discrepancies between Bitcoin and futures prices, the risk of cross-border investment, and the potential for funds to get too large and push the limits on how many contracts they can own.

Van Eck illustrated that when there is a bitcoin rally, futures strategies can underperform by as much as 20% a year. “The SEC wants to have some visibility into the underlying Bitcoin markets,” he said.

Van Eck also suggested that the SEC is still looking to gain more control over cryptocurrency trading, and currently, it is making attempts in several ways. For instance, the regulator recently stopped Coinbase to provide a lending product. Other popular trading platforms like Robinhood have already registered with the SEC and are regulated as broker-dealers.

Achieving such regulatory control could help the Bitcoin futures ETF’s chances, but it is unclear by how much, Van Eck said.

“They clearly have some control over players in the underlying bitcoin markets, so maybe that increases the chances from zero, but I have no idea what they are,” he said.

Investors Betting Big on Crypto 

Bitcoin surged its value 35% in the last two weeks and even reached a high of $57,000 level on Tuesday, October 12, as investors increased their optimism about the SEC’s plans for several bitcoin ETF applications currently under its review.

However, any speculation over a possible delay could adversely affect the prices of the flagship cryptocurrency as analysts had suggested that big investors may be purchasing Bitcoins in anticipation of an ETF approval this month.

Eric Balchunas, Bloomberg senior ETF analyst, is still confident that there is a 75% chance that the SEC could approve an ETF this month.

However, other analysts, just like Ulrik K.Lykke founder of crypto/digital assets hedge fund ARK36, remain sceptical to the foreground of the approval of Bitcoin ETF:

“Historically, the expectations for investment vehicles and instruments of a more institutional grade have often ended up in a “buy the rumour, sell the news” scenario for Bitcoin; a Bitcoin ETF will have a net positive effect on the development of the space but it likely won’t result in an immediate, dramatic rise in institutional adoption of digital assets.”

Earlier this month, the SEC extended deadlines of four Bitcoin exchange-traded funds (ETFs) for 45 days, citing the requirement for additional time to decide whether to accept the 19b-4 applications.

On October 1, the regulator rescheduled approval of four Bitcoin ETFs - Global X Bitcoin Trust, Valkyrie XBTO Bitcoin Futures Fund, WisdomTree Bitcoin Trust and Kryptoin Bitcoin ETF – until November 21, December 8, December 11, and December 24, respectively.