The digital currency bitcoin is one of the hottest things on Wall Street, just as exchange-traded funds have become the most popular investment vehicle around. However, despite what is seen as heavy interest and pent-up demand, investors shouldn’t expect the two to be combined soon.
A bitcoin-tracking ETF has long been seen as a Holy Grail by both ETF sponsors, who could garner hundreds of millions of dollars in assets from investors who want an easy way to get exposure to the highflying cryptocurrency, and by the bitcoin community, which would view an ETF as a mark of further legitimacy. There have been a number of bitcoin ETF applications from multiple sponsors, but several applications have been pulled in recent days, including at the request of the Securities and Exchange Commission, a sign the SEC is unlikely to approve such a product soon.
On Monday, Direxion Shares ETF Trust withdrew its application for the Direxion Bitcoin ETF. “The Staff expressed concerns regarding the liquidity and valuation of the underlying instruments in which the Fund intends to primarily invest and requested that the Trust withdraw the Amendment until such time as these concerns are resolved,” the filing read.
On Tuesday, ProShares Trust withdrew four bitcoin ETF-related applications, which it wrote was “made in response to a request from the Staff.” VanEck Vectors ETF Trust also withdrew an application on Tuesday.
Neither Direxion, nor VanEck could immediately be reached for comment. ProShares declined to comment, and a spokesperson for the SEC said the agency doesn’t comment on filings.
The SEC last year rejected what would’ve been the first bitcoin ETF to hit Wall Street, the Winklevoss Bitcoin Trust ETF. In a ruling, the government agency wrote that “the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.” The decision is being appealed.
Since then, however, the asset class of digital currencies is seen as having matured in ways that could have made the SEC more open to approving a product. Digital currencies have become much more mainstream over the past year; the cryptocurrency exchange Coinbase has seen massive growth in its customer base, alongside huge price gains in bitcoin BTCUSD, -6.37% Ether, Ripple, and other notable digital currencies. Hedge funds have also become more active with investing in and trading the asset class.