Approval of a concurrency ETF is something the whole industry is looking forward to but experts believe that there are many factors that need to be taken into account before an exchange traded fund for digital assets gets approved. The co-founder and partner at BX3 Capital Investment Advisory, Kyle Asman believes that an ETF might not come about over the next 6 months. Talking to BlockPublisher he said:
Right now the crypto market is lacking direction. I don’t think anyone is thinking an ETF is going to be approved within the next six months.
2019 was tipped to be the year an exchange traded fund (ETF) will be approved for Bitcoin. After prices skyrocketed in 2017 and a record number of ICOs taking place in 2018, it was predicted that Bitcoin will see an ETF approved as the next step. However, lacking regulatory framework and with financial institutions all out against any progress made by the digital currency space has not only apparently postponed the idea, but also pushed back the exponential growth cryptos had started to show in late 2017. Bitcoin price free fall from $19,500 to $3,500 is a clear indicator of a bear market. The financial institutions are determined to curb any effective usage of cryptos as a form of trade and payment that is ultimately anticipated to replace the traditional fiat currencies.
An ETF for Bitcoin and subsequently other cryptocurrencies would help bring new investment into the market and would serve as a connection between the investor and the traded asset, without real-time ownership of it. But regulating a new financial market is not easy and cryptos are facing the same regulatory pressures. Kyle further said:
The regulatory burdens are just too high for a very unregulated market.
Bitcoin currently lacks regulation which has been a major point of contention towards its mainstream adoption. Its pertinent usage over the dark web, unethical hacking and laundering activities has given it a rather bleak image among the commons and has put regulators under severity of thought regarding its legalization.
Another aspect that escapes thought process of crypto influencers and leaders that tout for a regulated ETF is the legitimization of cryptos without thorough understanding of it on the investor’s part. The CEO of Economic Index Associates and Professor of Finance at Creighton University, Robert Johnson explained how Bitcoin ETF will prove to be extremely dangerous for investors. Talking to BlockPublisher, he said:
The approval of Bitcoin ETF is incredibly dangerous for investors as it will help to legitimize cryptocurrencies in the minds of many potential investors as an asset appropriate for investment.
A Bitcoin ETF with the current status of crypto volatility would in many ways prove to be harmful to potential investors. An approval before unified and thorough understanding of the crypto market will create further trust deficit within users that invest into the space. Financial literacy, that is currently lacking in the space, is essential before making an ETF approval part of the agenda. Johnson further added:
There is an extremely low level of financial literacy among investors and sanctioning ETFs on speculative assets such as Bitcoin that does a great disservice to investors.
An ETF would definitely help crypto prospects as a whole, as Bitcoin would then become an accepted form of asset investment and will be tracked by the ETF. It will also allow new investors into the space who would be able to diversify their investments without holding any crypto asset. This also saves them from the security issues of storing these assets but experts believe that the crypto space is not yet mature enough to materialize as a backed asset on an ETF and it owes to reasons primarily led by the lack of regulation.
Other factors such as its usage in illegal and laundering activities also weigh in against the approval of an ETF. Investors are currently unaware of the volatility aspect of Bitcoin and other digital currencies while an ETF approval in the current scope would grant the very investment status to cryptos that other assets pertain to. Financial education about digital assets must also become resourced before an ETF is approved for BTC.