The dream of a US Bitcoin ETF is getting closer

How much is a Bitcoin really worth?

It is a tough question to answer and one that is made all the more difficult because to date there is no properly constructed Bitcoin exchange traded fund (ETF) trading in the world’s largest market – the United States.

That may be about to change, with Global X looking to register an ETF that will issue and then list shares on the Cboe BZX exchange.

The trust is planned to mostly reflect Bitcoin’s performance and will hold and manage Bitcoin as its main trading asset.

Global X has about $40 billion in its managed assets and more than 80 different products – mostly ETFs and managed funds.

Global X was bought by giant Korean company Mirae Asset Global Investments in 2018, which has almost $700 billion in funds under management.

SEC might finally pull the trigger

This application by a serious player will be a big test of the US Securities and Exchange Commission (SEC) which to date has not approved any Bitcoin ETFs – although there have been indications that might change after Canadian and European markets have listed Bitcoin ETFs in an attempt to make the cryptocurrency more tradeable and to reduce buy/sell spreads.

Two of the Canadian crypto ETFs have already passed $1 billion in value.

SEC commissioner Hester Peirce – widely known as “Crypto Mom” in the Bitcoin community – has expressed concerns over the US lagging behind global jurisdictions in adopting cryptocurrency ETFs.

Speaking online to a Bitcoin conference, she said: “I would never have imagined that I would be in this situation where we would not yet have approved one and other countries are moving ahead.”

The SEC commissioner also mentioned her concern that US regulators could be overstepping their remit by forcing the local crypto industry to play by a separate set of rules than everyone else.

“We’re not a merit regulator, so we shouldn’t be in the business of deciding whether something is good or bad. An investor is thinking of their entire portfolio, and sometimes we’re thinking in one-off terms of a particular product standing on its own, and we forget that people are building portfolios,” she noted.

Ms Peirce has criticised US crypto regulation, with the SEC commissioner last month urging authorities to refrain from over-regulating the crypto industry.

She has long advocated for clear crypto rules, saying they are critical if the industry is to thrive without fear of breaking the law.

Is Bitcoin a speculative bubble?

As for the real value of a Bitcoin, it has been a genuine controversy.

Magellan’s billionaire co-founder Hamish Douglass made plenty of headlines with his claim that cryptocurrency markets were one of the greatest mass delusions in modern history.

While that was part of a broader overall warning in his annual letter that asset prices have been artificially inflated by government and central bank stimulus and may face a day of reckoning, it is still disconcerting to hear such a respected investment figure claim that it was inevitable that crypto will crash to zero when other speculative bubbles eventually run their course and blow up.

“I predict all these forms of cryptocurrencies that are not backed by central banks or backed by assets will ultimately go to zero. I can’t tell you when it will happen, but it’s inevitable that it will go to zero,” Mr Douglass said.

“Cryptocurrencies, I have to say, are one of the greatest irrationalities I’ve seen in a very, very, long period of time because of the cult-like following it has behind it and the scale that is behind it.”

“There are millions and millions of people participating. Some of the people, they’ve never invested before and the only bandwagon they’ve ever got on is the cryptocurrency bandwagon and it’s almost like a religion.”

Volatility but Bitcoin has been an enduring winner

Bitcoin has certainly taken investors on a wild ride, falling by more than half of its April 2021 value in recent months, although Bitcoin has still seen massive growth having grown almost 50-fold at its peak.

On the other side of the ledger there are no shortage of bulls who believe there is a strong future for cryptocurrencies with Tesla and SpaceX entrepreneur Elon Musk recently revealing that both companies hold Bitcoin.

“Bitcoin by itself simply cannot scale to become the monetary system for the world at base layer,” Mr Musk said, adding that Bitcoin will “struggle to become peer-to-peer cash” without the adoption of a second layer network.

Musk still on board the crypto express

“There may be some merit in combining something like Ethereum and Dogecoin,” Mr Musk said, revealing he owns some Ethereum tokens in addition to his Bitcoin and Dogecoin.

Mr Musk also revealed Tesla will “likely” restart Bitcoin payment support so that the cryptocurrency can be used to buy cars.

“There’s some merit in considering something that has higher max transaction rate and lower transaction cost and seeing how far you can take a single-layer network with exchanges acting as a de facto second layer,” Mr Musk said.

“I think you could take that further than people realise and as bandwidth increases over time, latency decreases.”

Could Bitcoin be bigger than the US dollar?

Thomson Reuters technologist and futurist Joseph Raczynski has also predicted Bitcoin will overtake the US dollar by 2050.

“Some countries will leverage bitcoin as their primary currency of choice,” Raczynski said, adding he thinks Bitcoin’s value will exceed US$150,000 by 2050.

“With fixed circulation, ease of transfer, it will serve them well to move to a ‘bankless’ model inherent in this ecosystem.”

Whichever camp you might be in, a US-based Bitcoin ETF would be a welcome addition to the investment landscape, increasing the ease of buying and selling and reducing the transaction costs and spreads between buying and selling prices.

It would also increase the perceived “safety” of the investment, given that the collapse and hacking of crypto exchanges has been a bugbear for the sector.