The United States Securities and Exchange Commission (SEC) is poised to allow the first Bitcoin futures exchange-traded funds (ETFs) to begin trading sometime next week. While the US regulator has not explicitly stated so in a statement or a press release just yet, it did put out a tweet through its investor education account that says, "Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits."
The tweet also added a link to an SEC bulletin from June which states that "investors should understand that Bitcoin, including gaining exposure through the Bitcoin futures market, is a highly speculative investment."
Before investing in a fund that holds Bitcoin futures contracts, make sure you carefully weigh the potential risks and benefits.— SEC Investor Ed (@SEC_Investor_Ed) October 14, 2021
Check out our Investor Bulletin to learn more: https://t.co/AZbrkpfn8F
The tweet does not specify ETFs but cryptocurrency enthusiasts have read into it as a hint that the SEC would approve bitcoin-backed futures ETFs, that will invest in Bitcoin-based futures contracts instead of the cryptocurrency itself.
In a separate report by Bloomberg, published hours after the SEC tweet, it was stated that the SEC is unlikely to block a Bitcoin futures ETF, barring a last-minute reversal, which would clear the way for one to begin trading as soon as next week, peaking enthusiasm among investors.
Exchange-traded funds or ETFs in the crypto world are essentially a portfolio of cryptocurrency tokens that track the value of a crypto-asset (in this case, Bitcoin) and trade on share market exchanges rather than cryptocurrency exchanges. They allow investors to invest in a crypto asset without having to go through a cryptocurrency exchange.
So, the price of one share of the exchange-traded fund fluctuates with the price of Bitcoin. If Bitcoin increases in value, so do the ETF, and vice versa. Bitcoin futures ETFs are different from Bitcoin ETFs as they are based on futures contracts and are filed under mutual fund rules.
A surge in demand for Bitcoin futures contracts is also anticipated, with exchanges in the US planning to raise the limit on the number of Bitcoin futures contacts a single firm can hold.
The price of Bitcoin, meanwhile, briefly surpassed $60,000 (roughly Rs. 45,18,378) for the first time over six months on Friday, following reports that a Bitcoin futures ETF would be approved.