Valkyrie’s CIO Steven McClurg: Regulators May Approve Spot Bitcoin ETF by Month’s End

By 0xK2 11/4/23 2:27 AM

In a recent interview with ETF.com, Valkyrie’s Chief Investment Officer (CIO), Steven McClurg, shared an optimistic outlook regarding the potential approval of a spot Bitcoin Exchange-Traded Fund (ETF) by the Securities and Exchange Commission (SEC) by the end of this month. As Bitcoin prices have more than doubled in the past year, investors have been eagerly awaiting the introduction of a spot Bitcoin ETF, which is expected to attract billions of dollars in investment.

Valkyrie, a firm that currently manages two ETFs with assets totaling $51.1 million, believes that previous concerns about market manipulation and pricing have been successfully addressed by the cryptocurrency industry. McClurg is confident that these issues will not be the basis for ongoing amendments to applications, providing further grounds for optimism within the industry.

Several well-established financial institutions, including BlackRock Inc., Fidelity Investments, ARK Invest, Grayscale Investments, and more, have been advocating for the creation of ETFs that directly hold Bitcoin, as opposed to the Bitcoin futures products currently available.

McClurg expects that the SEC will provide additional comments to firms in the coming weeks, with the potential approval of firms’ 19b-4 rule changes anticipated by the end of this month. A late November approval could potentially lead to a February ETF launch, as the SEC may delay requesting final touches on S-1 filings until the new year.

SEC Chairman Gary Gensler has confirmed that the agency is currently reviewing eight to ten spot Bitcoin ETF applications, indicating the high level of interest in this emerging investment product. The approval of rule changes (19b-4) and registration statement filings could occur simultaneously or separately, depending on the SEC’s evaluation process.

The focus of the SEC’s comment letters to firms has revolved around the need for more thorough risk disclosures and inquiries into how firms will utilize their respective indexes and calculate Net Asset Value (NAV). Recent amendments to filings have incorporated environmental risk disclosures, expanded explanations regarding pricing sources and underlying benchmarks, and detailed information about custodial arrangements. Notably, BlackRock and VanEck’s filings have included information about how the funds will be initially funded.

Despite the mounting optimism surrounding the approval of spot Bitcoin ETFs, concerns still linger. Market manipulation and custody issues remain unresolved in the eyes of some industry experts, who believe there is more work to be done. Matt Hougan, CIO of Bitwise Asset Management, cautioned that market manipulation could still pose a significant obstacle, even with the progress made, citing ongoing legal battles such as the GBTC lawsuit. He also pointed out that custody solutions must be carefully considered.

Both McClurg and Hougan anticipate substantial demand for spot Bitcoin ETFs upon launch. McClurg predicts around $10 billion in demand during the first four to eight weeks, while Hougan speculates that inflows could reach “somewhere north of $50 billion” over the initial five years, with heavier inflows anticipated in the latter years.

Hougan expressed hope that a spot Bitcoin ETF launch is on the horizon, likening the current state of affairs to being “in the red zone” of a football game, with the primary question being whether the industry can successfully cross the finish line in the coming months. With the cryptocurrency space evolving rapidly, and the potential approval of a spot Bitcoin ETF drawing nearer, investors and market participants eagerly await further developments from the SEC and the industry as a whole.

Join us on Telegram