An Exchange-Traded Fund (ETF) is an investment that can be easily traded on the stock market. Instead of having to directly own a specific stock, commodity, or security, investors can buy and hold an ETF, which tracks the price of the asset. The Bitcoin ETF would track or follow the price of Bitcoin so people who want to speculate on the price of Bitcoin can do so without actually having to own the Bitcoin themselves.

So why wouldn’t people just buy Bitcoin themselves? For most mainstream investors and traders, bitcoin and cryptocurrencies in general are still very risky. Besides having unclear regulations, owning bitcoin requires having a bitcoin wallet and dealing with a crypto asset exchange; both still uncharted and intimidating territory for people unfamiliar with the space. With an ETF, private keys, storage, and general security can all be managed by a trusted party instead of the investors themselves.

What is a Bitcoin ETF?

Basically a Bitcoin ETF combines a traditional investment instrument, the ETF, with the most popular crypto asset: bitcoin. This creates a simple and legally compliant way to invest or trade the price of bitcoin that is accessible on the markets that investors are already familiar with. 

Who Invented the Bitcoin ETF?

The Bitcoin ETF is simply a normal ETF with bitcoin as the underlying asset being tracked so no one invented the concept. However, the first application for a Bitcoin ETF was filed with the Securities and Exchange Commission (SEC) by the Winklevoss Bitcoin Trust in 2013 and the U.S. Patent and Trademark Office awarded the Winklevoss’s a patent for “exchange-traded products.”

Did you know?

The SEC has rejected a total of nine Bitcoin ETF proposals in the last six years.

A brief history

  • July 2013 – The first Bitcoin ETF proposal is filed by the Winklevoss Bitcoin Trust.
  • June 2018 – The Winklevoss’s second Bitcoin ETF proposal is rejected by the SEC.
  • October 2019 – Bitwise becomes the latest project to have its Bitcoin ETF project rejected by the SEC.

What’s so special about it?

A Bitcoin ETF brings accessibility and, perhaps more importantly, money from the traditional investing world into the crypto asset world. It creates a safe bridge for mainstream and institutional investors to make bets on the price of bitcoin. Bitcoin ETF proposals continue to be proposed and pushed to the SEC despite being rejected over the last six years because one approval may open up a floodgate of new investments into the crypto space.

Did you know?

Cannabis or

marijuana ETFs have become popular for many of the reasons that a Bitcoin ETF would likely become popular. Just like crypto, the marijuana industry is viewed as risky and uncertain by traditional investors who still want the opportunity to profit from it.

What else is different?

A Bitcoin ETF is expected to bring a new level of mainstream trustworthiness and acceptance. Essentially, an approval by the SEC means that institutional investors would able to trade and invest in the price of bitcoin. That also means that Bitcoin joins the rest of the securities market and can be easily exchanged for Tesla stock, US bonds, gold, oil or any other traditional asset. 

How is a Bitcoin ETF produced?

The firm managing the ETF would have to hold bitcoin for their clients. Investors who purchase shares of the Bitcoin ETF would indirectly hold those bitcoin. The price of each share of the ETF would go up and down depending on the buying and selling activity throughout the day. 

How do you invest in a Bitcoin ETF?

As of November 2019, there are no Bitcoin ETFs available for trade in the United States. They have not been approved by the SEC because Bitcoin is still seen as an extremely volatile market that is highly susceptible to fraud and price manipulation. 

The Future

Although Bitcoin is still seen by many as a dark, seedy, and highly risky investment, the times they are a-changin'. Since its inception over 10 years ago, Bitcoin has been getting more mainstream recognition and support from respectable entrepreneurs, investors, politicians, and regulators. In the recent congressional hearing for Facebook’s upcoming Libra cryptocurrency project, many politicians spoke highly of Bitcoin and blockchain technologies in general.

There is a belief among the crypto community that it will only be a matter of time before this general acceptance translates into a fully approved Bitcoin ETF. With a new SEC decision deadline coming soon and more ETFs in the queue, an approval is either never going to happen or inevitable. Bitcoin holders are hoping for the latter.