Introduction to bitcoin ETF
Nov 25, 2024
What are the advantages of bitcoin ETF?
Compared with the mainstream digital asset trust funds represented by GBTC in the current market, Bitcoin ETF has the following advantages:
1. Trading is freer. ETF allows market makers to create and redeem stocks at will, while GBTC does not allow redemption, and the realization of fund shares must be traded in the secondary market.
2. Better liquidity. GBTC has a lock-up period of six months, and usually there is a high premium. ETF is more liquid, and there is usually no premium or discount.
3. The transaction cost is lower. The transaction cost of GBTC is high, involving brokerage fees, annual management fees and a premium. In contrast, the cost of bitcoin ETF is much lower. Taking management fees as an example, the current annual management fee of GBTC is 2%, while the management fee ETF——BITO, a bitcoin futures ETF launched on October 19, 2021, is only 0.95%.
4. The investment threshold is lower. The investment threshold of GBTC is high, with a starting investment of $50,000, which is only open to qualified investors. Bitcoin ETF has fewer restrictions on investor qualifications and investment amount.
A brief history of bitcoin ETF
In July 2013, Winklevoss brothers submitted a bitcoin ETF application to the US Securities and Exchange Commission (SEC), which was the first recorded ETF application in the history of bitcoin development.
In July 2016, the blockchain technology company SolidX submitted a bitcoin ETF application to the SEC.
In January 2017, Gray submitted the application for Bitcoin ETF to the SEC for the first time, and then announced the cancellation of the application in October of that year.
In December 2017, Direxion and GraniteShares submitted applications for bitcoin ETFs to the SEC respectively, but they were both rejected in August 2018.
In January 2019, Bitwise submitted a bitcoin ETF application to the SEC, but it was rejected in October of the same year.
In June 2020, WisdomTree Trust submitted a bitcoin ETF with only 5% bitcoin assets to the SEC.
In February 2021, the first bitcoin ETF in North America, Purpose Bitcoin ETF, was approved in Canada and began to be listed and traded on the Toronto Stock Exchange.
In October, 2021, Gray submitted another application for Bitcoin ETF to the SEC.
In October, 2021, the SEC approved the listing of Proshares Bitcoin Strategy ETF (BITO) and started trading in NYSE Arca. This is the first bitcoin ETF in the United States, but it should be noted that BITO is a bitcoin futures ETF product. As of October 20, 2021, the SEC has not passed any bitcoin spot ETF.
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