In April, MarketWatch and Barron’s will convene a group of crypto industry participants to discuss the asset class landscape (part one was on April 7; part two will take place on April 14). One session focused on “the illusory bitcoin ETF” and featured Jan van Eck from VanEck and Som Seif from Purpose Investments. VanEck has filed with the SEC to launch a bitcoin ETF in the US, and Purpose launched such a fund in Canada in February. It has already raised $ 1.2 billion in assets.
Not surprisingly, they both had strong opinions on the advantages a BTCUSD bitcoin, + 2.83% ETF, would bring for US investors. ETFs have proven to be the most efficient way for investors to expose themselves to different assets, Seif noted, particularly those that have historically been less easy to access, such as gold. Van Eck agreed. ETFs bring price competition to the markets, just as they did with gold, he said, in addition to transparency, tax reporting and more efficiency in trading. Both panelists said they believe that bitcoin’s volatility will decrease as access increases and as the industry approves more benchmarks, such as Coinbase’s public offering. Noting the flood of recent requests to launch funds, they both acknowledged that it is unclear how many different exchange-traded products the market could absorb. Even if the SEC approves several different applications, investors will pick winners and losers, Seif said. Fees attract a lot of attention in the ETF space, he added, but “strategy is more important”, and strategy becomes more important in a fund landscape that involves putting a digital asset in a “traditional finance” envelope. Van Eck agreed, calling bitcoin “revolutionary” for finance, in part because it involves instant settlement and 24/7 trading. “Execution and mechanics are in baseball, but it’s important to get it right,” he said. If gold GC00, + 0.90% has a market capitalization of $ 10 trillion, he said, bitcoin could be expected to reach about half that amount, which would represent that prices would increase another six times. As the asset continues to mature, VanEck is beginning to see a critical mass of other entities in the crypto ecosystem, be they miners or banks, that an ETF representing companies with such exposure may make sense, van Eck said. He noted that companies with pure crypto games, such as Riot Blockchain Inc. RIOT, + 6.26% and Silvergate Capital, SI, + 9.08% have exceeded the price of bitcoin, even as companies that include access to crypto among other features, such as Paypal . PYPL, + 2.55% and Square Inc. SQ, + 3.57%, underperformed. “This is a sentiment asset,” Seim said. Although supply and demand will play an important role in pricing, what is consistent is that volatility has decreased every year since inception, he argued, and will continue to do so as bitcoin becomes more legitimate as an institutional asset. Read Next: ETF Wrap: Crypto Edition