Recent “breakthroughs” are reason enough for Bitwise CIO Matt Hougan to suggest that this time really is different.
The US Securities and Exchange Commission has repeatedly declined applications for a spot bitcoin ETF since the initial attempt in 2013. Back then, bitcoin was valued at just $80. However, Hougan argues that the market has matured a great deal since that time. With the latest series of applications, conditions appear to be changing for the better.
On the 0xResearch podcast (Spotify/Apple), Hougan says “we’re getting close to an approval,” pointing to Grayscale’s recent lawsuit victory over the SEC and BlackRock’s ETF application success rate, “which has a nearly perfect record of launching ETFs.”
Hougan adds that Bitwise “just sent in an additional 40 pages of research” to the SEC. The research answers “every objection the SEC has raised over the history of denying a spot bitcoin ETF.”
“They’ve rejected, I think, 33 spot bitcoin ETFs,” Hougan says. “For each one, they wrote between 20 and 100 pages of reasons they were rejecting it.”
“We just line item all those rejections and then provide data driven responses to explain why the market is now ready to support an ETF,” he says, adding, “I’m optimistic that we’ll see a spot bitcoin ETF launch this year.”
Spot bitcoin ETFs have been rejected so many times, Hougan says, that long-time onlookers are numbed to the possibility. Many are experiencing a sort of “boy who cried wolf” syndrome, he says, believing such an ETF will never be approved.
“But if you talk to the firms, not just Bitwise,” Hougan says, “but other firms that are operating in this space, it does feel different this time than it did a few months ago.”
Some issuers have received responses from the SEC on their ETF prospectus, Hougan adds, which has never happened before. “There’s reason to believe the market hasn’t priced in or thought about the real probability that we may get one in the coming months.”
Futures versus spot ETFs
While crypto futures ETFs have not been received with great enthusiasm, Hougan expects an entirely different story with spot ETFs. “A spot ETF is going to be orders of magnitude bigger than a futures ETF.”
“If you look in the gold market, which is the closest corollary,” Hougan says, “spot gold ETFs have about 100 billion dollars in assets under management. Gold futures ETFs actually have zero because the only one that existed closed down because of lack of interest.”
“What people want is spot Bitcoin. What people want is spot Ethereum. They’ll use futures based ETFs until they have those.”
Hougan expects “100x” demand for spot crypto ETFs compared to futures. “They’ll have a much bigger impact on the market.”
Hougan explains that many financial professionals are deciding what to buy in the traditional market, “and it just looks gross.”
“They’re going to go into bonds and bonds look gross. They’re going to go into stocks and stocks look gross. It’s going to be a recession. They’re already highly valued.”
The phenomenon is causing investors to consider how to escape the “gray overhang” of rising rates, spiraling inflation and a possible recession, he says. “What are the secular trends that are strong enough to supplant that and surpass that?”
“Right now, crypto looks really good.”
