The United States (U.S.) Securities and Exchange Commission SEC may seek to kill bitcoin through the approved bitcoin futures exchange-traded funds (ETF) in May 2022 and the frequent rejection of multiple bitcoin spot ETF applications on the grounds that it is too risky.
In recent months, the value of BTC has suffered, falling significantly to just over $19,000 from an all-time high of over $68,000 in November 2022. However, the United States SEC policy does not appear to favor its recovery through its policy.
In May 2022, the U.S. SEC approved the Valkyries Bitcoin futures exchange-traded funds, which, unlike the Bitcoin spot ETF, do not contribute much to BTC’s price recovery, development, and widespread adoption.
A bitcoin futures ETF is a regulated financial product that allows investors to interact indirectly with the bitcoin market. Bitcoin-related products are held in Treasury in futures ETFs while Bitcoin is held in spot ETFs, and shares issued here can be redeemed in BTC itself, which is impossible with cash-only futures ETFs.
The approved futures ETF by the U.S. SEC significantly presents counterparty risk because cash-settled ETFs are all derivatives. Also, the SEC regulation of bitcoin by futures ETF dilutes exposure to bitcoin. It substantially impacts its acceptance, as futures ETFs only mimic exposure to up to 85% of their NAV (net asset value), and the remaining 15% is invested in safer instruments like government bonds to act as a cushion. As a result, they do not reflect the actual value of Bitcoin.
Furthermore, settlement and redemption of shares in fiat currency in bitcoin futures ETFs significantly reduce direct interaction with bitcoin and do not encourage divergence as they involve more betting on the price of futures rather than the actual asset bitcoin.
In addition, the creation of casinos like CME Bitcoin Casino, which allow customers to play with USD and sell unlimited BTC, significantly impacts BTC price recovery. As a result, the consideration and approval of spot ETFs can solve these problems as they allow direct interaction with BTC.
