BlackRock, Cathie Wood’s ARK, and WisdomTree are among the latest market players to amend their spot Bitcoin exchange-traded fund (ETF) applications with the U.S. Securities and Exchange Commission (SEC). This move follows the SEC’s preference for cash-settled Bitcoin ETFs rather than physically settled ones.
The SEC has been skeptical about approving Bitcoin ETFs in the past due to concerns around market manipulation and the lack of proper regulation in the cryptocurrency space. To address these concerns, the SEC has indicated a preference for cash-settled ETFs, where the fund’s value is derived from the price of Bitcoin, rather than physically owning the digital asset.
BlackRock, the world’s largest asset manager, submitted a revised prospectus for its Bitcoin ETF, which now includes cash-settled Bitcoin futures. The company had previously sought to provide exposure to Bitcoin through a portfolio of Bitcoin futures contracts traded on the Chicago Mercantile Exchange.
ARK, which is known for its innovative and disruptive investment strategies, has also revised its Bitcoin ETF filing. The company initially aimed to invest directly in Bitcoin, but it has now changed its approach to a cash-settled model. ARK’s Bitcoin ETF would track the performance of a Bitcoin index and allow investors to gain exposure to Bitcoin without actually owning the underlying asset.
WisdomTree, an exchange-traded fund and asset management firm, is another company that has made changes to its Bitcoin ETF application. The firm’s revised filing includes plans for a cash-settled Bitcoin ETF, emphasizing the use of regulated futures contracts to gain exposure to Bitcoin.
These recent amendments reflect the market players’ willingness to adapt their strategies in order to meet the SEC’s preferences. The move towards cash-settled Bitcoin ETFs is seen as a compromise that could address the regulators’ concerns around custody, valuation, and potential market manipulation.
Cash-settled Bitcoin ETFs have some advantages over physically settled ones. They eliminate the need for custody of the underlying asset, which reduces the risk of theft, hacking, or loss. Cash-settled ETFs also provide a more straightforward valuation process, as the value of the fund is derived from the Bitcoin futures price. Additionally, cash-settled ETFs may be more appealing to traditional investors who are hesitant to directly invest in cryptocurrencies.
However, the shift towards cash-settled ETFs does come with some drawbacks. By not owning the physical Bitcoin, investors miss out on potential benefits such as receiving dividends or participating in hard forks. Furthermore, cash-settled ETFs may be more susceptible to volatility in the Bitcoin futures market.
In conclusion, BlackRock, ARK, and WisdomTree have revised their Bitcoin ETF filings to align with the SEC’s cash-only model. The move towards cash-settled ETFs reflects the market players’ flexibility and willingness to address the SEC’s concerns. While cash-settled ETFs offer some advantages in terms of custody and valuation, they also come with drawbacks compared to physically settled ones. It remains to be seen how the SEC will respond to these revised applications and whether cash-settled Bitcoin ETFs will gain approval in the near future.