In many ways, 2017 was a watershed year for cryptocurrencies.
The sector began the year with a market cap of $15 billion and ended the year at $600 billion, and along the way it garnered immeasurable amounts of buzz and hype befitting a mania where it seems that everyone from Wall Street bankers to hipsters want a piece of the action.
Numerous exchange-traded fund providers who are champing at the bit to play the crypto game have filed product registrations with the Securities and Exchange Commission. But will the SEC finally relent and allow some of these products to come to market?
Who knows?
Apologies for the wishy-washy conclusion, but that was the consensus of the two members on a panel devoted to cryptocurrencies that held court in the large session hall at the Inside ETFs conference in Hollywood, Fla. on Tuesday. The well-attended session spoke to the growing investor interest in this sector, but if the audience came in seeking clarity regarding the future of cryptocurrency ETFs, they might have left the session disappointed.
Both panelists—Jan van Eck, CEO and president of ETF provider VanEck, and Hunter Horsley, founder and CEO of Bitwise Asset Management, a San Francisco-based firm focused on cryptocurrencies—took a pass when asked if they thought crypto ETFs were in the offing in 2018.
Then again, it’s hard to blame them because it seems everything about cryptocurrencies is quickly evolving and hard to pin down. That’s why the SEC so far has put the kibosh on ETF approvals in this area as it wrestles with concerns over extreme volatility in this space, along with liquidity issues surrounding a product built around digital currency assets.
The regulator so far has shot down applications for bitcoin-related ETFs, and earlier this month the SEC ordered roughly a dozen bitcoin ETF filings to be withdrawn and asked the industry to address questions concerning security, liquidity and valuation before it approves any funds.
Bitcoin, which was created in 2009, is the granddaddy of cryptocurrencies. But it’s now just one of nearly 1,400 cryptocurrencies on the market, and it comprises roughly 35 percent of the overall cryptocurrency market cap, according to Horsley.
While two blockchain-related ETFs began trading last week (blockchain is a shared and decentralized public information ledger that stores transaction data in blocks of information, and is the underpinning technology of cryptocurrencies), the SEC remains queasy when it comes to funds focused solely on cryptocurrencies.