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SEC Chair Gary Gensler says The U.S. Securities and Exchange Commission (SEC) has eight to 10 filings of possible exchange-traded products for bitcoin in front of it for consideration. In the past month, Bitcoin has rallied on speculation that SEC approval is imminent for a spot bitcoin exchange-traded fund (ETF). The approval is seen as a driver of demand because it would allow investors to obtain direct exposure to the cryptocurrency via an exchange-listed product.
Digital Journal spoke with Kenny Estes, CEO of Diffuse Funds about the chances of spot Bitcoin ETF approval and impact to Bitcoin and other crypto currencies.
Estes has over 20 years of experience in capital markets/financial services. He has held positions as a high-frequency trader (Getco now Virtu Financial, from startup to IPO), venture capitalist, incubator/manager of emerging alternative funds. His areas of expertise include key trends driving crypto adoption and how to take advantage of them, regulatory news and what it means for investors, general outlook on crypto markets, Diffuse Funds’ DD30 holdings and more.
Digital Journal: What is holding up the SEC for immediate approval?
Kenny Estes: I honestly believe at this point it is an administrative delay. The SEC needs to figure out what exactly it is going to do. It’s uncertainty at this point, or it’s trying to find another way to reject BlackRock, Grayscale and all of the other ETFs. But the SEC is in engagement, so I don’t really think that there’s much more holding it up. We’d expect it to get approved pretty soon.
DJ: When do you expect the approval of spot Bitcoin ETFs to occur?
Estes: I think it’s going to happen by the end of the year, December most likely. I think the SEC wants to approve all the ETFs at the same time. In particular, BlackRock to give it most chance at institutionalization. The optical window was six months from when they put that ETF application in. We’re coming up on that year mark, by the end of this year which is why I think the timeline is where it is.
DJ: What will be the immediate impact to Bitcoin prices in the short (3 to 6 months) and long term (1 year)?
Estes: The market seems to be waiting for the big impact. There is definitely a scenario where this approval is the catalyst to the next proper bull market. The bottom to top of the bull markets historically has been about 4x. So that’s obviously an optimistic projection. But within the realm of possibility, if we start to see the same cycle repeat itself over again.
In the last cycle, we went from a low of 3,500 to a high of 65,000. That was 20x from low to high. Typically, we see a 20x increase from bottom to high. We’re double off the lows right now. So that would be actually a 10x over the next four-year cycle. Potentially we’ll see more institutional flow and so it could be a longer cycle.
DJ: What other crypto currencies stand to benefit?
Estes: All of them will benefit. All of them have a very high beta to Bitcoin. That’s just the reality. And in fact, most of the alternatives have a higher than 1 beta to Bitcoin. So, you know, rising tide lifts all ships sort of scenario. We would expect virtually all of them to go in that direction. I will say that if bitcoin ETF is approved, then the Ethereum spot ETF is going to be approved shortly thereafter. And those two are historically tied at the hip, being the two largest.
DJ: How should investors position themselves to benefit from the SEC approval?
Estes: Near term, the Bitcoin spot ETF should rally the bitcoin price, but it will generally increase the interest in cryptocurrency overall. And one could argue that it potentially could have more of an impact on non Bitcoin pricing long term. As such, invest in a broad based basket of different cryptocurrencies to maximize their potential benefit.
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