BTC - Bitcoin doesn't have an ETF due to its market size?
Here's a new one...
Tom Lee of Fundstrat Global advisors says that one of the main reasons that bitcoin and crypto still don't have an ETF is due to their size.
Or should I say, their lack of size.
In a recent interview, Lee said that with the entire cryptocurrency market only valued around $200 billion, it's still much too small to really support a highly demanded ETF.
Especially as it relates to bitcoin, which is worth less than $150 billion.
According to Lee, highly demanded ETFs can easily see north of $13 billion in demand during their first year, and according to Lee, the demand for a bitcoin ETF is "monstrous".
Which means, he thinks that bitcoin is just too small of a market for an ETF currently.
How big does bitcoin need to get for an ETF to make sense?
According to Lee, it has a long ways to go.
Specifically, Lee said that the SEC needs to punt on the idea of a bitcoin ETF until bitcoin is worth roughly $150k per coin.
At that price point, the market size of bitcoin would be of sufficient size to accommodate the daily demand of a highly demanded bitcoin ETF, again, at least according to Lee.
(Source: https://u.today/bitcoin-price-must-hit-150000-before-sec-approves-btc-etf-fundstrats-tom-lee)
Furthermore, Lee also said he thinks that the SEC has done a good job thus far with bitcoin and crypto.
Neither stifling it too much or allowing too many scams to go unabated.
The SEC continuing to do a good job is paramount for institutions eventually feeling confident and comfortable enough to enter the space.
More from Lee can be seen here:
My thoughts...
This sounds believable in one sense but not in another.
It's believable that there needs to be enough value/liquidity floating around out there to really make a bitcoin ETF work like it is intended.
If there is no liquidity and everyone tries to get in at once, it could cause even more volatility in prices than bitcoin already experiences as well as other potential distortions/problems.
That part makes some sense, the rest not so much.
We have leveraged volatility ETFs and all kinds of smaller market ETFs at this point and there hasn't been the kind of delays or scrutiny levied on them that bitcoin has seen.
My opinion is that the SEC isn't comfortable with crypto and bitcoin on many levels and they keep moving the goal posts in order to keep it in check.
It seems they would prefer to never have a bitcoin ETF at all.
I am of the opinion there is no reason we can't have a bitcoin ETF right now
Lee would know all the ins and outs of these things a lot better than me, but from everything I have read and seen I don't think he would be able to convince me otherwise.
I'm not expecting one for a long time at this point, but that doesn't stop me from believing we would be just fine if we had one right now, today.
GBTC has been operating for years now, with very little issues (other than trading at ridiculous premiums).
The bitcoin futures markets are close to 2 years old and are moving along just fine, with physically settled/delivered contracts now trading as well.
While an ETF would be different than either of those two, on many levels it is still mostly just an extension of either of those.
I still think the market could handle one right now, but it is sounding more and more like we won't be getting one any time soon.
Stay informed my friends.
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-Doc
interesting topic! thanks for sharing
You got it.
I do believe that the main reason for the SEC's rejection for Bitcoin ETFs are fears surrounding market/price manipulation.
In a way, as price of Bitcoin increase, it will become more expensive for any one person or entity to control it. Thus, this allows for Bitcoin to spread around to more people, and creating a more liquid market as its being held by a greater percentage of the population.
Nevertheless, I don't think liquidity alone will help calm the SEC's concerns around manipulation, as there are still various methods for that to happen, such as "wash trading " (which I've written more about here), or flash crashes caused by major liquidations (think BitMEX with their ridiculous leverages), etc. while could still impact the market.
Yep, you are probably right. Though think about this... who sets the market prices for diamonds? That is one of the least transparent and subjective markets out there, yet they have are well on their way to an ETF, and that is just one example. The SEC is being pretty ridiculous about all their price manipulation fears. Ironically, allowing an ETF would bring more liquidity and likely decrease the ability for smaller players to manipulate.
I can agree to that. Allowing more market instruments such as an ETF, as we've seen before with futures, and custodian solutions, will allow the market to mature further.
This will, in time at least, allow more players to take part in the Bitcoin markets, thus creating more liquidity, which in turn will allow the market to become more robust.
It's sort of a 'chicken or the egg' type of thing.
I think it's chicken and egg kind of problem... For BTC to climb up to required level, it needs an ETF first. With current emission level, it has close to zero chance getting required trading volume without an ETF.
Kind of my thoughts as well.
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