As someone completely out of the loop what was preventing ETFs from including Bitcoin? Is there some regulation about what types of assets can or cannot be part of an ETF?
Can I go make an ETF for magic the gathering cards? How about restaurant reservations or taylor swift tickets?
Each ETF needs to be approved by the SEC. You are welcome to submit an application for your restaurant reservations.
Historically the SEC has refused these grants for Bitcoin ETFs on the basis that the underlying asset does not have well-established spot markets and credit mechanisms. See for example [1].
Greyscale finally sued the SEC for applying arbitrary and capricious standards, and prevailed in federal court. But even so the SEC has not approved spot bitcoin ETFs (that is, ETFs that "physically" hold Bitcoin) but had only given guidance for cash-settled Bitcoin tracking ETFs. That makes this announcement a very unexpected surprise.
EDIT: And it does in fact appear that this is too good to be true. Looks like there was a brief spike up to $48k from the $46k baseline so somebody made out nicely on this little scam. Also goes to evidence that Bitcoin markets might be a bit too sensitive to manipulation to be suitable for inclusion in an ETF.
> Also goes to evidence that Bitcoin markets might be a bit too sensitive to manipulation to be suitable for inclusion in an ETF
I don’t understand how you came to that conclusion. $2k is a relatively small fluctuation. Do you think other securities wouldn’t be subject to the same fluctuations given positive news? If not, there shouldn’t be laws against it like there are now
$2k is ~5%; that's enough in a short enough time to trigger equity market circuit breakers and temporarily pause trading. Bitcoin has no such controls because there is no NMS regulation applied here, which is one of the SEC's fears around allowing Bitcoin ETFs.
I generally don't agree with this guidance as it is not universally applied to ETFs that the SEC has allowed historically, but it does buttress their case to a degree.
EDIT: bad math; closer to 4% price move -- although the rebound from the spike might break the threshold, current SEC rules use a trailing price band so wouldn't trigger here.
If we're just talking percentage changes, that can already happen with other commodity ETFs. I'll concede to the point that Bitcoin has historically been more volatile and could have a higher frequency of halts, but I personally don't think that should impact the formation of the ETF.
Violent agreement here, I think -- I also feel that the criteria are being applied arbitrarily and capriciously and we accept many things as ETF members that have far less liquid spot markets than Bitcoin. But incidents like this don't help.
Since they're exchange traded it's the SEC in the US (or other regulators in other countries) who decide if an ETF is approved or not. If you can convince them that magic the gathering cards are traded in a market that's sufficiently compliant with their regulations, I don't see why not. Maybe if BlackRock & co were really into MTG card trading, they'd be more compelled to approve. Seems to have helped Bitcoin because it many have filed and all were rejected until those big name asset managers got in ;)
Blatant market manipulation was preventing the ETFs. Then a court ruled that since the SEC mistakenly approved Bitcoin future ETFs they also have to double down and approve Bitcoin spot ETFs.
Can I go make an ETF for magic the gathering cards? How about restaurant reservations or taylor swift tickets?