Interesting article:
What I am wondering is what is BTC used for these days, and what is driving its value? I notice that GBTC is currently trading at a 15% discount to NAV at the moment. This would imply a nice immediate bump in value if allowed to convert from a closed-end fund to an ETF, or if it was liquidated due to an ETF. But really nervous about betting on those scenarios.
We explore a lot of risks on this board but I can’t think of a single entity more in danger of a single specific risk than Bitcoin and Regulatory Risk.
Most relevant snip:
In extreme cases, such changes can destroy a company’s business model.
I surmise that there is high correlation between the value of Bitcoin and likely future regulation reducing that success.
IF a bitcoin ETF is approved than all the regulatory risk is tamped down. But IF a bitcoin ETF is not approved then bitcoin will probably get a healthy haircut. Personally, I think, it is much more likely that a Bitcoin ETF is approved after everything that has gone on in court.
Andy
How so? How does there being an ETF in any way keep Congress from coming in and regulating Bitcoin?
There are AI ETFs and regulations are likely coming for those too. ETFs are not going to protect them in any way.
It doesn’t. But it does make it a little harder for the SEC from coming in and regulating BTC under a claim of existing regulatory authority.
As for the original question, the “story” behind Bitcoin is a claim that it will be valuable either as digital money or a digital analog to gold. That enough people will agree to act as though it has value for it to actually have value as either a medium of exchange or a store of value over time. If you accept that story, then the “value” of Bitcoin depends a great deal on the degree to which acceptance of it (either as currency or “gold”) spreads further and further into the broader financial sphere - and among retail, “ordinary” people.
Hasn’t that ship already sailed? There are already Bitcoin ETFs based on Bitcoin futures. BITO is the first and largest.
Not entirely. Bitcoin futures are regulated by the CFTC, not the SEC. A Bitcoin future already has received regulatory blessing, and therefore a Bitcoin Future ETF is/was difficult for the SEC to deny.
But Bitcoins themselves are not CFTC-approved instruments. Or commodities. They’re a thing that the SEC very much does not like, it appears. So the SEC has been…reticent to allow an ETF that holds Bitcoins, rather than Bitcoin futures.
If that distinction gets obviated by a court decision, it will reduce the regulatory risk for established financial institutions who might want to make it easier for people to purchase BTC. The SEC has (of late) been going after many crypto projects as being unregistered securities. They probably won’t do that for BTC…but neither have they confirmed that BTC isn’t a security, either. Losing in court might bring them closer to having to take that position.
It doesn’t, in fact if Congress does regulate it that would give it even more credence. Unless they regulate it out of existence, which is doubtful.
Regulations doesn’t mean demise. Many people want to have regulations for many different reasons.
Andy
Not so at all, the halving is happening next year. The bull market is possibly in its early days.