The search for a Bitcoin exchange-traded fund (ETF) has been a long journey, marked by highs and lows.
In fact, those excited about the possibility of a Bitcoin ETF getting approval as soon as January may be shocked to learn that the initial attempt at a Bitcoin ETF dates back to July 2013.
That's when investors Cameron and Tyler Winklevoss, then famous for their controversial role in creating Facebook, first proposed creating the Winklevoss Bitcoin Trust, an exchange-traded instrument that would open up Bitcoin to institutional investors.
However, despite their progressive proposal, the SEC formally rejected the proposal in March 2017, citing concerns about market oversight and regulation. At the time, Bitcoin's price fell about 30% on the news, falling from a high of around $1,400 to just over $900.
This rejection paved the way for a series of subsequent ETF rejections that have occurred since then.
However, even before Winklevoss's rejection, the search for a Bitcoin ETF continued with other entities submitting their own proposals.
2013 also saw SolidX submit a proposal for its own Bitcoin fund shortly after the Winklevoss brothers. Despite a subsequent partnership with fund manager VanEck, the VanEck SolidX Bitcoin Trust proposal was withdrawn in 2019.
Barry Silbert's SecondMarket, meanwhile, took a different tack, launching a publicly traded fund that holds bitcoin, but whose shares trade on over-the-counter (OTC) markets. Investors can buy GBTC shares through traditional brokerage accounts, and the value of each share is meant to track the price of Bitcoin. However, GBTC can trade at a premium or discount to the actual net asset value (NAV) of the Bitcoin you hold.
Since July 2017, Grayscale has applied to convert GBTC into an ETF. Despite being the largest and most popular Bitcoin fund, GBTC is still not listed on major US exchanges.
Over the past few years, amid turmoil at the parent company, discounts have shifted to 40%.
September 2017 saw ProShares apply for two Bitcoin ETFs, and it faced rejection in August 2018 along with seven other proposed Bitcoin ETFs.
December 2017 applications from Direxion and GraniteShares for Bitcoin ETFs, both rejected in August 2018.
2019 to today
In the wake of the 2017 bull market, there were a host of other hopefuls trying to launch a spot Bitcoin ETF.
By January 2019, Bitwise proposed the Bitwise Bitcoin ETF Trust, which was rejected by the SEC about nine months later. (She is among a group of new applicants seeking approval in January.)
At the same time, Wilshire Phoenix proposed a unique approach with a Bitcoin and US Treasury investment fund, hoping to merge Bitcoin and US Treasury securities. However, the SEC rejected this proposal in February 2020.
2019 saw the Realty Shares ETF propose creating a Bitcoin fund to invest in Bitcoin futures. The SEC was forced to withdraw the proposal after just two days.
2020 brought WisdomTree an application to set up a commodities fund, and it plans to invest up to 5% of its assets in Bitcoin futures.
Since then, traders have relied on stocks like MicroStrategy and Block to gain exposure to Bitcoin, as these two companies offer Bitcoin services, providing buyers with exposure.
Organizational transitions and resignations
The regulatory landscape underwent changes in December 2020 when SEC Chairman Jay Clayton stepped down from the SEC, and initially, there was optimism that change would occur.
For example, in 2021, President Joe Biden nominated Gary Gensler, former chairman of the Commodity Futures Trading Commission, as Clayton's replacement. The appointment was notable as Gensler had lectured on Bitcoin during his tenure at MIT, and even promoted several cryptocurrencies.
However, Gensler's policy responses to industry were arguably harsher.
During this transition period, VanEck resubmitted its application for a Bitcoin ETF in December 2020, marking the first application after Clayton. The SEC acknowledged the filing on March 15, providing a 45-day review window.
In 2021, Valkyrie filed a new application to list the Valkyrie Bitcoin Fund on the New York Stock Exchange. NYDIG subsequently applied for approval of its Bitcoin ETF in February 2021, coinciding with the price of Bitcoin reaching $50,000 for the first time.
March 2021 Fidelity submitted its application for approval of the Wise Origin Bitcoin Trust, adding another dimension to the ongoing quest for a regulated Bitcoin ETF.
Fast forward to the end of 2023 and there are 13 orders from players including Fidelity and BlackRock. Most applicants have met with the SEC and made amendments to their applications, which increases the odds of approval.
However, it is still only a sure bet. While Bloomberg analysts expect a 90% chance of approval, some fear the SEC will find creative ways to further delay the Bitcoin ETF's debut.
If previous fake news is any indication, markets will likely react to the decision, and volatility could be in store.