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Sept. 4, 2021, 1:47 p.m. EDT

Who needs a bitcoin ETF, anyway? It may hold little value for investors now—Here’s why.

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By Mark DeCambre

Hi there, again! I’m flooded. There is at least 3 inches of water in my basement in New Jersey. All thanks to what the media (hey, that’s me) is referring to as the remnants of Hurricane Ida.

Anyway, wading knee deep in water at 1 a.m. Eastern Time on Thursday, as I embarked upon the Sisyphean task of bailing bilge out of my basement got me to thinking about the flood of ETF applications for a bitcoin-backed products that Gary Gensler’ s Securities and Exchange Commission is wading through.

We talked to Will Rhind of GraniteShares, which put in an application for a long and short bitcoin ETF back in 2017, but is taking a hard pass this time around. I’ll leave you to judge whether Rhind’s reasoning is sound. Rhind is founder and chief executive officer of ETF issuer GraniteShares in New York, which was established in 2016. 

You know what to do: Send tips, or feedback, and find me on Twitter at @mdecambre to tell me what we need to be jumping on.

Sign up here  for ETF Wrap.

Why do we need a bitcoin ETF

There is a growing surge of bitcoin ETF applications for a futures-based product, after the SEC said that it would probably approve a bitcoin /zigman2/quotes/31322028/realtime BTCUSD -2.25% ETF that holds bitcoin futures /zigman2/quotes/211755589/delayed BTC.1 +0.23% , rather than the crypto itself. SEC Chairman Gensler views futures as a more regulated area of the market and one where he thinks investor guardrails are more sound.

Futures are usually a wager on an underlying commodity such as oil /zigman2/quotes/211629951/delayed CL.1 -0.22% , or gold /zigman2/quotes/210034565/delayed GC00 +0.06% and there is a growing bitcoin futures market run by CME Group. /zigman2/quotes/210449693/composite CME +0.32% Bitcoin futures trade separately from the underlying asset and values don’t always align.

Rhind told ETF Wrap during a Wednesday phone interview that there may not be any substantial point to the current rigmarole around trying to be the first to offer a bitcoin-backed ETF beyond the optics of it.

Back in 2017, Rhind said the thesis for providing a bitcoin ETF was clear.

“We felt bitcoin and other [crypto] currencies seemed like that was an asset that people wanted to trade and they couldn’t easily,” he said.

That dynamic has changed substantially over the past three years, he argues, because access is easier for the average investor due to platforms like Coinbase Global /zigman2/quotes/225893452/composite COIN -8.38% and other venues, such as PayPal /zigman2/quotes/208054269/composite PYPL -1.66% , that offer exposure to bitcoin.

“The best expression of an ETF has always been market access,” he said. “It can be lightening in a bottle when you combine a genuine need…there’s demand for a particular class and [the ETF],” addresses that need and unlocks value.

“But by now this is no longer a market-access story,” Rhind said. “People can already get access.”

The GraniteShares pro also said tax benefits that one might derive from a stock ETF wouldn’t likely be in play for a bitcoin futures ETF.

“The chances are that the tax treatment will be the same as it would if you owned the underlying futures directly,” he said.

John Hyland, CFA, and director of Matthews International, told ETF.com that so-called roll costs, as futures contracts expire, could also create idiosyncrasies in ETF prices and trading.

US : CoinDesk
-527.18 -2.25%
Volume: 0.00
Feb. 5, 2023 3:13p
US : U.S.: CME
$ 23,540.00
+55.00 +0.23%
Volume: 6,330
Feb. 3, 2023 3:59p
US : U.S.: Nymex
$ 73.23
-0.16 -0.22%
Volume: 394,327
Feb. 3, 2023 4:59p
US : U.S.: Nymex
$ 1,877.70
+1.10 +0.06%
Volume: 296,669
Feb. 3, 2023 4:59p
US : U.S.: Nasdaq
$ 176.55
+0.56 +0.32%
Volume: 3.08M
Feb. 3, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$63.51 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 74.63
-6.83 -8.38%
Volume: 37.13M
Feb. 3, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$16.94 billion
Rev. per Employee
US : U.S.: Nasdaq
$ 85.52
-1.44 -1.66%
Volume: 14.79M
Feb. 3, 2023 4:00p
P/E Ratio
Dividend Yield
Market Cap
$97.50 billion
Rev. per Employee
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