Wild West Comes to Wall Street, Crypto Asset Mainstream
Tuesday, October 19, 2021, the debut of Bitcoin traded on US exchanges, sparked a surge in the cryptocurrency boom, as those who had long believed in cryptocurrencies saw this opportunity as a very important digital asset verification.
With the start of ETF trading by ProShares, Bitcoin reached over $66K bringing its marketcap to $1.24 trillion and pushing the total value of crypto assets to over $2.63 trillion.
Over 24 million securities changed hands, making it the second largest ETF ever traded (after the BlackRock Carbon Fund). The ETF's closing price was 3.2% higher than its opening price.
The ETF itself doesn't hold bitcoins, but rather bitcoin futures, or contracts to buy and sell bitcoins on a specific date in the future, meaning that it doesn't track the spot price of Bitcoin, but provides the future price through the Chicago Mercantile Exchange.
The excitement surrounding such cryptocurrencies lies in the acceptance of crypto assets as a mainstream investment in the US and creating the potential to attract a wider investor base. Now the door has opened, leaving many other cryptocurrency ETFs queuing up to list.
Even though the chairman of Pro Shares, Gary Gensler, described the crypto asset market as a “Wild West”, as full of scams and abuse, the US Securities and Exchange Commission still allowed the release of the ETF or perhaps at least did nothing to stop it. Interesting!
However, the U.S. Securities and Exchange Commission is willing to let the almost inevitable turn of the ETF, the first listed cryptocurrency, into sending bad signals to crypto enthusiasts who are uncomfortable with it.
The main problem of the cryptocurrency market today is that there are many exchanges in the world, which provide different prices between them, resulting in a lack of liquidity. Resulting in extreme volatility, lack of transparency, barely regulated, and prone to manipulation and hacking.
Over the years, the SEC has opposed many proposals to create a vehicle for direct ownership of Bitcoin. Their willingness this time, allowing the ProShares ETF to go public provides a new insight into the thinking of all of us.
Regarding Futures, it is traded on the CME (Chicago Mercantile Exchange) and is regulated by the Commodity Futures Trading Commission. Investors must deposit cash to trade and meet margin call requirements. These listed ETFs will be regulated by the U.S. Securities and Exchange Commission under the Investment Companies Act of 1940. Like mutual funds, the assets of these ETFs are held by custodians.
The transparency, liquidity and security of securities traded on a tightly regulated exchange is far more important than simply accepting the existence of an encrypted asset market.
Gensler initially complained that the SEC did not have the legislative power to regulate crypto assets, and then urged the US Congress to immediately allow the ProShares ETF to go public. That way, they actually get the power to carry out regulation and supervision, which they almost never had before.