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Comment by erentz | Hacker News Reader

It’s weird to me they approve futures based ETFs, that are terrible for investors seeking BTC exposure (lose money due to roll), and approve closed end funds like GBTC that are also worse for investors due to inability to track spot price (its been stuck in a serious discount for nearly a year, prior to that it was in a massive premium, both have screwed plenty of people who bought it). But somehow an actual plain, direct, spot ETF that can provide redemptions to authorized participants is the one that’s not allowed.

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> But somehow an actual plain, direct, spot ETF that can provide redemptions to authorized participants is the one that’s not allowed.

Custodianship is probably why they’ve rejected direct spot ETFs that own real bitcoins. It would be disastrous if hacked. There’d be no restitution for investors.

With futures-based bitcoin products, no one is actually holding bitcoins. It’s cash settled between the long and shorts based on a published closing price. So the BITO ETF has no risk of being irreparably hacked.

We don't have to speculate. The SEC has stated their reasons. They are concerned mainly about market manipulation, not custodianship.

I think you’re overlooking the part of their statements where they have repeatedly emphasized investor protections.

Some of the different ETFs are filed under different legislations, and the SEC claim that the Investment Company Act of 1940 provided better investor protections than the Securities Act of 1933, but I’m unclear of what particular stipulations make that so.

Sorry what are the reasons?

The bitcoin ETFs on CME are cash settled. Plunge protection team likely feels safer with cash settled 'btc' than physically settled, because people can't stand for delivery to break the back of PPT manipulators.

It appears cash settled futures were put in place in 2017 specifically to break the bull market in btc at that time. It worked.

> It appears cash settled futures were put in place in 2017 specifically to break the bull market in btc at that time. It worked.

The price was totally unsustainable given the amount of supply entering the market daily due to mining. An insane amount of money would have had to flow into bitcoin every day to sustain those prices. At least, insane given the size of the bitcoin market at the time. There is no need for any other explanation for why the bull market ended in early 2018.

It's because (in the SEC's view) crypto spot markets are highly manipulated but futures markets aren't.

This is a nonsense position, though. Crypto futures markets track spot markets. It doesn't make the slightest bit of sense to allow futures and not spot. If spot is manipulated, so are futures.

Cme btc futures can be spot settled if you can find a willing counterparty for an otc block trade.

I really don't understand the logic of this. The futures markets follow the spot market. If there's manipulation of the spot markets that is so short term that it doesn't affect the futures markets, it shouldn't affect a spot ETF either. And if there's manipulation of the spot markets that is long term, it will affect the futures markets just as much as a spot ETF. What kind of manipulation is the SEC specifically worried about that would affect a spot ETF but not the futures market?

> spot markets are highly manipulated but futures markets aren't

If the spot market is manipulated, the futures will reflect the manipulated price. Though the SEC doesn't come out and say it, it looks like this is a concern around custodianship.

Bitcoin futures are hedged at the periphery. If a trader loses their Bitcoin, they are unhedged and go broke through usual channels. Bitcoin ETFs hold that risk at the centre. If they lose their Bitcoins, we have to deal with trading halts and moms-and-pops losing their shirts and the family office that quintuple-leveraged their ETF bet and is threatening to take out a bank.

Why wouldn't they come out and say it?

> Why wouldn't they come out and say it?

Gives the applicant space to cure the concerns and the SEC room to reverse in the future.

Plenty of options if you can access Canadian markets. Generally I would not recommend due to high fees and probably ??? tax situation.

taxes should be fine as there are no dividends. High fees depends on the broker. Interactive Brokers has good canadian coverage. The issue I have seen is more to do with FX rates offered by retail brokers arent great.

its happenstance

https://news.ycombinator.com/item?id=29666409#29667640

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