Hidden risks of approving Crypto ETF, investors should need to know

 The SEC has decided to wait until mid-October to say if they will let people make new Bitcoin ETFs. This is a delay, and it's making some people upset.

 

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The US Securities and Exchange Commission (SEC) has yet to approve a spot Bitcoin ETF, but the recent approval of a Bitcoin futures ETF has raised hopes that a spot ETF could be approved in the near future. A spot Bitcoin ETF would track the price of Bitcoin directly, while a futures ETF tracks the price of Bitcoin futures contracts. Futures contracts are agreements to buy or sell an asset at a predetermined price on a future date.

The SEC has been reluctant to approve a spot Bitcoin ETF because it is concerned about the potential for market manipulation and fraud in the Bitcoin market. However, the recent approval of a Bitcoin futures ETF suggests that the SEC is becoming more open to the idea of cryptocurrency ETFs. There are several spot Bitcoin ETF applications pending with the SEC. The SEC has a maximum of 240 days to approve or deny these applications. This means that the first spot Bitcoin ETF could be approved as early as January 10, 2024.

If a spot Bitcoin ETF is approved, it would be a major win for the cryptocurrency industry. It would provide investors with a regulated and convenient way to gain exposure to Bitcoin, and it could lead to increased demand and liquidity for the cryptocurrency.

Problems and Dangers in Approving Crypto ETFs, What Crypto Beginners Need to Know: 

Regulatory Risks:

The rules for crypto ETFs (kind of like investment funds) are really complicated and have many problems. It's hard to get permission to make these funds, which makes people who want to invest in them unsure about what will happen. Important government groups, like the U.S. Securities and Exchange Commission (SEC), are worried about people doing bad things in the crypto market, like cheating and tricking others.

A person named Todd Rosenbluth, who studies these things at VettaFi, said that a possible government shutdown could make it even harder for new ETFs to be allowed. He thinks that if the SEC can't look at new ETFs, some of them might be allowed to start without being checked first.

The SEC has decided to wait until mid-October to say if they will let people make new Bitcoin ETFs. This is a delay, and it's making some people upset. One expert, Todd Sohn, said that both the people who want to invest and the people who want to make these ETFs might be getting tired of waiting. He also said that the ETFs that are already allowed might have more ups and downs in their prices.

But now, there won't be a government shutdown, which is good news. Someone who really likes crypto, Mike Dudas, said that he's looking forward to the SEC making decisions about six Bitcoin ETFs because there's no reason for them to wait anymore.

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Not a Big Money Maker

Bitcoin costs a lot of money for just one. This makes it tricky for regular people to invest in. So, some folks are looking for different ways to invest in Bitcoin without all the difficulties of buying it directly.

One option they're considering is a Bitcoin ETF. This is like a special investment that lets you get into Bitcoin without needing a fancy digital wallet or dealing with unstable Bitcoin exchanges. But, experts are warning that Bitcoin ETFs have their own risks, according to Gulf News.

Brian Deshell, who's a cryptocurrency trader and expert in the UAE, says that when you buy shares of a Bitcoin ETF, you're sort of tagging along with Bitcoin's price. But it might not give you everything you want if you want to deal with cryptocurrencies. He says you should be sure that your money is safe with a regulated product like a Bitcoin ETF. But, it hasn't really been proven to make you rich in the crypto world, and there haven't been many rules passed to make it work better.

Brody Dunn, who works for a company that helps people with their money in the UAE, says that even though a Bitcoin ETF isn't directly investing in cryptocurrency, it's still tied to Bitcoin. So, you could still lose money. He says you should be careful and do your homework before trusting that it's super safe.

Dunn thinks having a Bitcoin ETF is good for Bitcoin and other cryptocurrencies in general. But he's worried that it might help big companies more than regular people. While big investors might put a lot of money into the market through an ETF, normal folks might not get the same advantages as they hoped for.

 

Further SEC Delays on Crypto ETFs:

The SEC is taking more time to decide on allowing Bitcoin ETFs in the United States, even though some government representatives wanted them to approve it quickly. They postponed the decision on Ether ETFs from VanEck and ARK 21Shares to December 25 and January 10. GlobalX has to wait until November 21 for the SEC to decide on their application. They also pushed back the decision dates for Bitcoin ETFs from Invesco, Bitwise, and Valkyrie to mid-January.

These delays happened two weeks earlier than expected by many applicants. They thought they would hear back from the SEC between October 16 and 19. The delays might be because the U.S. government was almost shut down, which could have caused problems for different government agencies, including financial regulators.

Bitwise Asset Management, in response to the delay for its Bitcoin ETF, made changes to its application to address the SEC's concerns about the product. They looked at the academic research that was not clear on how Bitcoin futures and the regular Bitcoin market relate to each other.

At the same time, some investment firms like ProShares, VanEck, Bitwise, Valkyrie, Kelly, and Volshares have started trading nine ETFs related to Ethereum on the Chicago Board Options Exchange (CBOE). This is the first time these kinds of ETFs related to Ethereum are being traded in the U.S. market. ProShares introduced three funds: the Ether Strategy Fund (EETH), the Bitcoin and Ether Strategy ETF (BETH), and the Bitcoin and Ether Equal Strategy ETF (BETE). These funds give investors different ways to invest in both Bitcoin and Ether.

 

Conclusion:

Crypto beginners might understand the challenges and potential risks associated with the approval of cryptocurrency Exchange-Traded Funds (ETFs), particularly Bitcoin ETFs, by the US Securities and Exchange Commission (SEC). It highlights that while a Bitcoin futures ETF has been recently approved, the SEC has been hesitant to approve a spot Bitcoin ETF due to concerns about market manipulation and fraud. Several spot Bitcoin ETF applications are pending with the SEC, and the article suggests that the first approval could occur as early as January 10, 2024. However, the delay in decision-making by the SEC has frustrated both investors and ETF applicants. The article also mentions that Bitcoin ETFs may not necessarily be a guaranteed way to profit in the cryptocurrency market, as they are tied to Bitcoin's price and come with their own set of risks. Additionally, it discusses the recent delays in SEC decisions on Bitcoin and Ether ETFs, possibly due to government-related issues. Finally, it notes that some investment firms have started trading Ethereum-related ETFs, offering investors different ways to invest in both Bitcoin and Ether.