Midway through the summer of 2018, the U.S. Securities and Exchange Commission (SEC) gave cryptocurrency enthusiasts a reason to despair. After months of speculation and anticipation, the regulator revealed on August 7th that it would delay the announcement of a decision about the potential approval of the VanEck SolidX Bitcoin ETF for close to two months. Although the decision to move the announcement back to the end of September did not necessarily signal that the exchange-traded fund was doomed to failure before it could even launch, many in the bitcoin community reacted as if that had been the case. Indeed, in just a few days the entire cryptocurrency market lost more than 15%, according to Bitcoin Exchange Guide.
The VanEck SolidX ETF was not the first bitcoin-linked fund of its kind to come across the approval desk of the SEC, but many in the community saw it as potentially the strongest candidate. With the updated deadline for the decision announcement approaching, investors are likely wondering what, if anything, will happen with this ETF application. Below are some reasons why there may still be hope for a successful approval of the bitcoin ETF.
CBOE Sources Remain Confident
According to the Bitcoin Exchange Guide report, sources at the Chicago Board and Options Exchange (CBOE) remain confident that the ETF will be approved at the start of 2019. One of the sources even goes so far as to predict with "99%" confidence that the SEC will ultimately approve the ETF, even if it comes with "a bunch" of pushback from the approval committee.
The team responsible for the development of the ETF is even anticipating a delay in the approval process. A source from VanEck suggested that the firm "expected this delay...we won't say when we expect an approval, but there have been specific speculation[s] that we actually agree with and have incorporated into our timeline."
With those in the know enjoying such confidence in the ultimate prospects for the ETF, should regular investors follow their lead? One could see this as evidence for the eventual approval of either the VanEck project or a similar cryptocurrency ETF. On the other hand, perhaps the developers of an ETF are not the most impartial analysts of matters such as these.
Bloomberg points out that the VanEck ETF has some features that earlier proposals did not, and that this could work toward a greater likelihood of approval. The fact that the VanEck ETF is slated to have a share price of roughly $200,000, considered incredibly high compared to most ETFs, means that only institutional and accredited investors will have access. Beyond that, the ETF will also insure bitcoins up to $25 million. Both of these could play a role in convincing the SEC that the VanEck ETF is able to avoid manipulation and other issues.
Bitcoin Futures Point to the Future
Another argument in favor of a bitcoin ETF is that bitcoin futures have seen tremendous increases in interest levels among investors. With the SEC concerned about arbitrage between bitcoin and a linked ETF, futures could help to eliminate or reduce any concerns. The more liquid the futures market, the more likely it is that the bitcoin ETF could be physically backed. On the other hand, the trading volume for bitcoin futures remains small.
Regardless of what happens when the SEC finalizes its decision about the VanEck ETF, it's a safe bet that the cryptocurrency market will react wildly. For HODLers and other enthusiasts, an approval could mean a quick boost to values of cryptocurrencies across the board. A final rejection, though, could bring about a slump even more significant than the previous one.