The First Bitcoin ETF the SEC Will Approve Will be Physically Backed

Still, pundits are optimistic that a Bitcoin ETF approved by the SEC will hit the market in 2019.After reviewing every single Bitcoin ETF proposal in the last two years, I'm quite confident that any Bitcoin ETF based on Bitcoin futures will be rejected.

The first Bitcoin ETF the SEC will approve will be physically backed.

Tracks Performance of Bitcoin - Since the ETF holds Bitcoin, it should track the performance of Bitcoin well.

Higher expense ratio - Bitcoin ETF will likely have higher fees than traditional ETFs due to the high transaction costs APs have to pay in the creation and redemption of ETF shares when they choose to submit or redeem, baskets of cash.

Instead, the ETF tries to mimic the performance of Bitcoin by trading Bitcoin futures, options, swaps, money market instruments, and investing in other pooled vehicles.

Risks & Concerns:Approximating the performance of Bitcoin - Since the fund only approximates the performance of Bitcoin, there could be scenarios where the returns of the fund are significantly divorced from the performance of Bitcoin.

Despite not having custody risk, I am hesitant to believe that the SEC will approve a futures-based Bitcoin ETF that is exposed to so many underlying risks.

Bullish about VanEck's SolidX FilingLike we said, VanEck's and SolidX are filing for a physically backed Bitcoin ETF. I'm quite optimistic about this proposal.

In order to placate the SEC's concerns about protecting retail investors, a minimum purchase of VanEck's proposed Bitcoin ETF is valued at 25 BTC.In my opinion, a Bitcoin ETF targetted towards institutional investors has a much better chance of being approved.

A Cryptocurrency ETF Index is Far, Far AwayIf the SEC is making this much of a fuss about Bitcoin, I think we are very, very far away from a cryptocurrency index ETF.To approve a cryptocurrency index, the SEC will have to put every coin in the index through a process as arduous as the one for BTC.Cover Photo by Sam Trotman on Unsplash.