Education, Investing

What’s up with the bitcoin ETF?

By now, the Securities and Exchange Commission’s (SEC) review (and rejection) of bitcoin exchange-traded funds (ETF) has become almost like a seasonal tradition in the crypto world.

Crypto market watchers are excited by the potential approval of a bitcoin ETF because a green light from the SEC is viewed by many as a clear signal that the long-awaited wave of institutional money would begin entering the crypto markets.

So far, most of the $220 billion crypto market value (as of this writing) has come from retail investors, or individuals investing in any of the thousands of crypto projects that now exist.

Traditional institutional money, which includes large pools of money managed by banks, investment firms, and other fund managers, is orders of magnitude greater than the current crypto markets.

So, the thinking goes, the introduction of institutional money to the crypto space will not only drive up prices of individual assets, but the increased liquidity could also help smooth out some of the major crypto market swings.

SEC and a bitcoin ETF

Earlier this week the SEC announced that it was rejecting the proposals put forth by a handful of investment managers.

The SEC claimed that the bitcoin ETF proposals have still not adequately addressed the regulators concerns about market manipulation, particularly since cryptocurrencies are traded on hundreds of exchanges around the world.

While the news didn’t really come as a surprise to most crypto market watchers, what was an unexpected move was the SEC’s announcement a day later that it was going to review its decision to reject the bitcoin ETFs.

The timeline for a reviewed decision is still unclear.

Institutional money on the way

In a recent video, Abra CEO Bill Barhydt explains that while the SEC continues to study the regulatory implication of bitcoin ETFs, there are other indications that institutional investors are gearing up to enter the crypto market in the next 12 months.

Currently, one of the main barriers to entry for institutional money is a good custody solution, or how to securely obtain and store millions of dollars of investments. Large investment firms are unlikely to want to outsource custody, especially since the market is still young and immature.

Instead, many firms are developing their own custody solutions or at least investigating all of their options. Once crypto custody gets solved for larger scale fund managers, then there will likely be a lot of institutional money looking to invest in cryptocurrency projects.

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