The wait for a bitcoin ETF has been so long, protracted, and
complicated that it has begun to have a mythical quality to it, as though
it is something ephemeral, intangible, silently goading cryptocurrency
markets to keep up the good fight.
What is the bitcoin ETF and why is it important for cryptocurrency
markets in general? More importantly, should you be waiting for it, and
are there ETF-like solutions that already exist for bitcoin and other
Well, thatʼs a load of questions, so weʼll parse through them one by one
to paint an accurate picture of the current bitcoin ETF landscape and
what, if any, options exist for creating your own cryptocurrency ETF.
What is an ETF?
First, a quick recap for the uninitiated: ETF is short for Exchange
Traded Funds. ETFs are tradable securities that track entire indices or
baskets of assets. ETFs can be traded on exchanges just like regular
securities such as stocks.
When you invest in an ETF, you arenʼt buying ownership of the
underlying assets. Instead, the ETF owns the underlying assets and
ETF buyers are shareholders in the ETFʼs performance. Because of this,
traditional ETFs provide shareholders with what is known as indirect
Why a Bitcoin ETF Hasnʼt Been Approved
The long-unfolding drama that has been the bitcoin ETF process
continues to drag on. Amongst the many reasons cited regarding the
SECʼs unwillingness to approve a bitcoin ETF, the glaring one has to do
with bitcoin price manipulation. Although there appears to be sufficient
liquidity behind bitcoin, the SEC remains concerned that market
manipulation is a major force and that bitcoin values remain hostage to
The SEC declared on September 20, 2018, that they would delay
making a ruling on the latest bitcoin ETF proposal by VanEck/SolidX
while they investigate market manipulation further. Although another
delay seems like a bad omen for an ETF approval, the very fact that the
SEC is taking extra time out to sufficiently judge the latest proposal is a
very encouraging sign.
How a Bitcoin ETF Works and Why Traditional ETFs Have Limitations
Pending approval from the SEC, bitcoin will be added to the roster of
assets that can be bought and held by ETFs. Just as ETFs are capable
of holding any traditional stock, so too will it be possible for retail
investors to indirectly own bitcoin via an ETF.
The very possibility that bitcoin assets will be accessible to retail
investors in traditional investment vehicles like ETFs has most
cryptocurrency market speculators watering at the month.
There is, however, a glaring reason to stop and take pause.
Traditional ETFs offer indirect ownership of assets, meaning you, the
investor, have no direct claim over the assets held by the ETF.
Secondly, purchasing shares in an ETF is by no means a simple process
with most ETFs having a high barrier to entry and require dealing with
intermediaries to participate.
Selling your shares in an ETF is also complicated because of trading
hour restrictions for the market a given ETF trades on, meaning
liquidating assets has to be done during certain times and on certain
Create a Decentralized Cryptocurrency ETF
Even with a bitcoin ETF approval, investors will be limited to joining
existing ETFs created by third parties. With the total number of
cryptocurrency assets reaching well into the thousands, it seems
difficult to justify focusing on only one, even if it is the flagship digital
Blockchain, the technology underpinning cryptocurrencies, enables the
creation of cryptocurrency ETFs by anyone, anywhere, and at any time.
MultiToken Protocol, for example, has created a platform for doing just
With MultiToken, users create their own ETFs with the advantage of
having direct ownership over the underlying assets, giving users the
power to liquidate their ETFs at any time to redeem their full value.
Furthermore, unlike traditional ETFs which are held on centralized
ledgers beyond investor reach, decentralized cryptocurrency ETFs
such as those created using MultiToken are owned directly by the
investor in a cryptocurrency wallet of their choosing.
A Bitcoin ETF approval will undoubtedly be positive for the entire
cryptocurrency space. However, because the technology introduced by
bitcoin and other blockchains
enables investors autonomous
management and ownership over their finances, the logical next step is
to take full control over investments too.