Will SEC Approve Bitcoin ETF? Interview with Mati Greenspan, Senior Analyst eToro

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Bitcoin ETF? Coingape was the first one to point to the potential of a possible Bitcoin ETF approval. It has given rise to speculations resulting in the current ongoing bull run. In an effort to bring more clarity on the bitcoin ETF debate we today have with us Mati Greenspan who is a senior analyst at eToro and Mr. Sunil Sharma, CEO at SquadX. 

They both shared their insights on an ongoing debate about CBOEs application for Bitcoin ETF. The major point raised during the interview were:

  1. 3 reasons why SEC might approve Bitcoin ETF this time.
  2. Why the sudden hike in the institutional investors’ interest in bitcoin?
  3. The future of bitcoin and the entire cryptocurrency market in case bitcoin ETF is accepted by the SEC and if not.

Here we go:

Ques: Hi Mati, can you please tell our audience a bit about yourself?

Mati: I am the Senior market analyst in eToro. I have been here since 2012. My job is to help people understand financial markets, why the movement, what opportunities are and of course how to build a proper portfolio. We were founded in 2007 with the vision to open the financial markets to everyone to make things easy for people to trade in stock, currencies and commodity prices.


Ques: Why were the previous Bitcoin ETF applications rejected?

Sunil: So basically we can cite a few reasons for these rejections among this major are:

  • In January 2018, The SEC had turned down plans by members of two Wall Street trade groups, Investment Company Institute and Securities Industry and Financial Markets Association to set up exchange-traded funds (ETFs) for bitcoin and other cryptocurrencies. These were rejected again as the SEC that there are a number of significant investor protection issues that need to be examined before sponsors begin offering these funds to retail investors.
  • Liquidity and notorious volatility of cryptocurrency markets would make retail investor lose their investment were sighted as the main issue. The other issues that were quested were Custody, Security of Assets and potential manipulation

Ques: Do you think SEC will approve the Bitcoin ETF application this time?

Mati: I certainly hope. During the previous bitcoin ETF, there was one in March that was proposed by the Winklevoss twins. And at the time the SEC rejected the ETF because there was not enough clarity regarding bitcoin and the market wasn’t really fully developed.

This ETF is structured a bit different than the previous one. First of all, it has a CBOE as a sponsor and VanEck is a traditional finance player that is making the proposition. I have read through the proposal which is about 50 pages. It includes one of the best explanations I’ve ever seen about what a bitcoin is, what mining is, what is cold storage and the market in general.

First, the contract size is going to be twenty-five bitcoins which are clearly aimed for institutional players, they are not coming here to pitch this to the average retirement portfolio.

That’s going to be one thing that could help persuade the SEC. The other is the market is much more well-defined now and much more developed. So the SEC has already clarified the status of Bitcoin at that point saying it’s certainly not security or anything like that.

And the OTC market is also more developed now. So we have telephone transactions between the counterparties that are larger. Coinbase has recently opened OTC desks. We at eToro have opened an OTC desk so it’s going to be a lot easier for them to get the liquidity that they need.


Ques: So, what are your views on the involvement of Wall Street investors and why are they interested in Bitcoin suddenly?

Mati: There are a lot of reasons that an asset manager would be interested in cryptocurrency. Lately, I’ve been giving an analogy of cinnamon. Cinnamon is considered a volatile ingredient. That’s because it’s very complex on the molecular level and it can have different interactions based on the different ingredients that you use it with.

Now, cryptocurrencies, of course, are incredibly volatile. Adding very small amounts of cryptocurrency to your portfolio, you can really add an extra spice and increase the profit potential of the portfolio. Of course, you don’t want to use too much because if you use too much you know can ruin the entire recipe.

Ques: So you mentioned institutional investors. What do you think would be their consequences in the market? Will it be just good? People are talking about the good part of it. Will there be any bad consequences?


Mati: In what way would there be bad consequences. It’s simply a new structured product that’s being built In order to allow people to invest more freely in cryptocurrency specifically institutional investors. I don’t see how there could be any negative consequences of that.


Ques: Ok so talking about 2018. How do you analyze the whole seven months that have passed? What do you think of the current market?

Mati: 2018 largely began with retracement from the top when we’ve seen a massive surge in all cryptocurrencies in the entire industry over 2017. Bitcoin is pretty much since an exception that has been following this kind of pattern, where it goes through a massive surge. Usually, quadruple-digit percentage points a thousand percent. In the past that been even larger. In 2011 when $11,500 in the span of a few months.

But every time it does that there needs to be a retracement from high and that retracement can be quite significant, sometimes 80 or 90 percent retracement even in the past. This retracement so far if we get as low as 5000 will represent a 75 percent retracement from the top. Yesterday’s action which was encouraging, we might have seen bottom already. But nothing is impossible.

Basically, this is how the cycle works. Generally, after the retracement, we’ll either see another major surge or a period of prolonged relaxation for cycles like those because we’ve seen worse.

In my humble opinion period of relaxation would be incredibly good for the market it’s a healthy thing and allows people to increase infrastructure, build apps and make new connections that help the market. If we do see another surge then we’d have to be very prepared to get into that type of volume again.

Also, read: If CBOE’s Bitcoin ETF gets Rejected, Will it Upend the Raging Bulls?


Ques: What makes bitcoin ETF proposal different this time?

Sunil: The major reasons seem to all been taken care of:

  • The ticket size of investment is set high to keep the product out of reach of very small retail investors. Each share, according to the proposal, would be of 25 bitcoins making it too expensive for a retail investor.
  • Luckily, custodial services for cryptocurrencies are now available with Coinbase and the Swiss Stock Exchange
  • With respect to the Theft due to hack is concerned, the application does mention all bitcoins held by the Trust will be stored using “multi-signature cold storage wallets.”

Ques: Talking about the predictions, people are making huge predictions and talking about millions of dollars. So what do you think about that?

Mati: I mean if you look at it in percentage terms those services that we talked about some of them have been quite sizable in percentage terms. Even in 2017 the surge wasn’t particularly large nor was the true retracement. It’s simply that we’ve come to a point where it’s a much larger market and the larger the market gets the more those surges should relax. So the more people that are using and holding bitcoin, the less the volatility at the end of the day.

Now for Bitcoin to become you know more or less stable cryptocurrency, I think that we would need to see a much larger market cap that could really take years to effect. We have noticed that with every cycle the volatility is reducing.

We definitely have a price much larger than it is today. So I don’t know. I suppose it’s possible on a long enough timeline given that it continues to be the dominant cryptocurrency in the space and I don’t see any reason for that to change.

Ques: So talking about the predictions that people are making what is your prediction?

Mati: I don’t have a number. The future is wide open. Bitcoin is incredibly risky and blockchain technology is still under development and experimental in many ways. So, it’s possible to see Bitcoin as low as a thousand dollars at the end of the year as high and as high as a million dollars. I really have no way of saying you can be anywhere in between.

Bitcoin ETFs are the talk of the market as SEC gathers overwhelming response from the public. As explained by Mati, Bitcoin ETFs certainly have better chances of getting approved this time. With Bitcoin already registering substantial gains since last week and having crossed $8k, Bitcoin ETF approval can skyrocket the Bitcoin prices in no time.

Nilesh Maurya

Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.

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