With the Securities and Exchange Commission (SEC) rejecting the Winklevoss twins' bitcoin exchange-traded fund (ETF) last week, crypto analysts are not very optimistic that the VanEck Bitcoin ETF will receive approval.
The SEC which is still reviewing other Bitcoin ETF’s such as the VanEck ETF also released a letter highlighting their concerns about bitcoin ETFs.
VanEck is a money management firm which is working with SolidX to bring a new bitcoin trust into the market. The company decided to release a letter to address the concerns pointed out by the SEC .
In a letter addressed to Dalia Blass, the director of SEC's investment management division, VanEck has looked to address all of the key issues that the original SEC letter presented on why it was hesitant about approving bitcoin ETFs.
First, VanEck pointed out that valuation should not be an issue for any futures-based bitcoin ETF. The market already uses futures to invest in various assets. The company thinks that the prices set by the Chicago Board of Exchange (CBOE) and the Chicago Mercantile Exchange (CME), which is already used by other financial products, should be enough. Second, VanEck responds to the concern about the potential ETF's liquidity by saying that the market itself is very liquid. The bitcoin futures market is doing very well against the physical market and as of now the total volume on the CME and CBOE has touched $200 million.
Third, for concerns about custody, VanEck plans to not invest in contracts where Bitcoins are physically settled with its ETF. Fourth, VanEck also discusses the possibility of arbitrage trading. With the volatility of the markets and the wide variety of bitcoin exchanges out there, there are inefficiencies of the platforms and price differentials to profit from. VanEck likens this to gold miner stocks and similar products.
Finally, addressing the SEC's concerns about price manipulation and risks, VanEck says that these risks are mitigated by the fact that it will be regulated product on a US exchange. With proper SEC enforcement, the market can be made safer for investors.
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VanEck Should Get SEC Approval
VanEck has tried on two separate occasions to get approval and failed. This time around the company is looking to address all potential concerns and remain optimistic about getting approval.
In a statement, Mati Greenspan, eToro senior market analyst, said
The VanEck ETF is specifically designed to suit the needs of institutional investors. The contract size is set at 25 BTC, which is about $200,000 at today's prices. When a hedge fund investor who manages billions of dollars is considering to diversify their portfolio into Bitcoin, they don't want to deal with things like private keys and cold storage. They also need the assurance of a trusted counterparty and a regulated exchange.
