Five Reasons the Winklevoss Bitcoin ETF Should Be Approved

The Securities and Exchange Commission is torn over the bitcoin exchange-traded fund. Maybe it shouldn’t be.

The agency has been sitting on, or perhaps agonizing over, a filing for the first ETF tracking a digital asset. Since the infamous Winklevoss Bitcoin Trust was filed in July 2013, bitcoin has returned an eye-popping 610 percent, while new filings for additional ETFs tracking bitcoin and ether have rolled in. Now, the SEC has announced it is seeking additional public comment.

The reasons not to approve the ETF are obvious -- namely, the questionable security and stability of bitcoin and its platforms, as well as possible new regulations. These legitimate concerns explain why this filing has been in limbo for so long and why it remains such an object of fascination. That said, here are five non-obvious reasons why the SEC should consider approving it, from a fund analyst’s perspective.

1. Look at the premium and spread of the Bitcoin Investment Trust.

Right now, bitcoin-exchange-averse investors seeking a U.S.-based investment vehicle for the digital currency are pretty much left with the Bitcoin Investment Trust (GBTC), a private, open-ended trust traded over-the-counter that currently trades at closed-end fund-esque premiums -- the difference between the price it trades at and the value of the bitcoin -- of between 50 and 100 percent. That’s not to mention an average bid/ask spread of 1.5 percent and an expense ratio of 2 percent. This kind of situation is why people love the ETF structure, with its creation/redemption process that helps keep prices and net asset values closer together via arbitrage. While a bitcoin ETF would most likely trade at premium, it would probably be much less than GBTC’s and would steadily improve as more and more professional ETF market-makers get involved.

Read the other reasons at the full article here: https://www.bloomberg.com/view/articles/2016-11-01/five-reasons-the-winklevoss-bitcoin-etf-should-be-approved