The cryptocurrency industry had a record year in 2021, not only in terms of new investors and increased mainstream acceptance, but also in terms of the introduction of a number of new investment products. These were significant developments that included the much anticipated launch of the US’s first Bitcoin ETF after years of rally and provocation by digital asset enthusiasts.
Even though the ProShares Bitcoin Strategy ETF (BITO) hit record highs when it launched in October, a large number of investors were disappointed that only Bitcoin futures-backed ETFs are currently allowed to trade by the Securities and Exchange Commission (SEC).
The SEC’s reluctance for a spot BTC ETF, which can be seen in its frequent rejection of such applications, has prompted many asset managers to either move further north to friendlier Canada or withdraw their applications altogether.
Matthew Hougan, CEO of senior crypto asset manager Bitwise, believes that the launch of BITO is an important moment for the ecosystem because it will signal growth and large capital inflows, it may not be the best product for willing investors.
The CEO stated in a recent podcast:
“This is a defective product, nobody likes it. It’s great if you’re trading Bitcoin for a week, not so good if you hold it for a year… It’s just not a viable product… The narrative that this will be the product that will allow for this institutional wall, and the narrative that your money will “flood” is completely false, I think.”
Interestingly, futures-linked ETFs that invest in contracts used to speculate on future BTC prices actually underperform when compared to spot Bitcoin, forcing anyone to doubt the SEC’s intent to “protect investors”.
One of the downsides to futures ETFs is that they are unattractive to financial advisors who control the bulk of American wealth and don’t “purchase crypto purchases on a phone app for their clients.”
Hougan also noted that while a BTC ETF would be a more appropriate option for this consideration, “the futures product is not something that could be portrayed as an optimal exposure to the asset.”
However, a silver lining can be seen in the government’s past treatment of investment products, according to the CEO, because Congress viewed ETFs as unsafe when they were first introduced as an investment product in 1993.
Hougan stated that this could also be a lesson for the current crypto market.
“We don’t always have to be in that kind of skeptical world situation. Through persistent lobbying, facts and analysis, we can move forward towards a future where it is embraced as normal.”
With the government’s growing interest in the industry, the recent congressional hearings of several crypto CEOs can be seen as a positive step in that direction. A comprehensive crypto bill could even be proposed by Congressman Lummis early next year.
Emphasizing the same thing, Hougan concluded his words as follows:
“I think the next bull market in crypto will be driven by positive regulatory developments and will come sooner than people expect.”
Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.