Of all the known and unknown events that could generate a massive spike across the entire cryptocurrency market, nothing is more significant or more sought after than an approved Bitcoin ETF. Specifically, a Bitcoin ETF that has the approval of the U.S. Securities and Exchange Commission. As reported by Coindesk and the SEC’s website, the SEC has slapped down all attempts to bring a Bitcoin ETF to traditional stock markets. The reasons for denials and many and varied, but every rejection is met with the Commissions concern over manipulation cryptocurrency markets. I find this odd. If the question of manipulation is enough to deny a new asset class an ETP classification, then how on Earth are Gold, Silver and Oil considered non-manipulated instruments?
Beyond the manipulation variable, the Commission also has concerns regarding custody and ownership. This is a valid point because Bitcoin is not a physical good – but a digital one. Various entities have addressed many of the biggest concerns related to custody and ownership of Bitcoin since the first ETF was offered up for consideration to the SEC back in 2017. The most recent answer to custodial issues was the release of the newest Bitcoin Futures contract by Bakkt Futures. The Bakkt Futures contract is a physical deliverable – which separates it from nearly every other derivatives market for Bitcoin on the planet. Futures with a physical delivery have a literal delivery of the good after the Last Notice Date and starting on the First Delivery Date. Because Bitcoin is a digital asset, delivery times should not be an issue for scheduling (unlike physical agriculture futures). Custody and security are just one of the variables affecting the success of a fully approved Bitcoin ETF.
The big reason for why an ETF matters for Bitcoin? Traditional money. When I’m talking about traditional money, I’m talking big retirement and fund managed money. I’m talking money managed by fiduciary financial planners and brokerage houses. I’m talking about the kind of money that is managed by people who, because of the law or ethics, are prohibited from participating in an unregulated market like Bitcoin. Listen – I trade for a living – I know what trading is and isn’t. It’s the most fun and miserable thing I’ve ever done. I wouldn’t trust me to manage my retirement, that’s why I use my Edward Jones guy to protect me from me. He gets Bitcoin – but he can’t participate in it on my behalf from his end.
Do you know how many customers Edward Jones has? Roughly 7 million. Do you know how much in total assets it has under management? 1 trillion US Dollars. Let’s put this into perspective. The third-largest economy in the world by GDP is Japan at $4.97 trillion. That’s one brokerage house. Do you know how large the entire US Stock Market was worth in January 2018? $30 Trillion. Traditional, ethical and regulated managers manage the vast majority of that $30 trillion. Do not doubt for a single second that when an inevitable Bitcoin ETF is finally approved, a $10k Bitcoin will seem as cheap as a $200 Bitcoin does today.