On August 22nd, the US Securities and Exchange Commission (SEC) rejected yet another nine Bitcoin ETF proposals from Direxion, ProShares, and GraniteShares. Commenting on SEC’s denial of the proposals, Brian Kelly from CNBC’s Fast Money said, “the sentiment was that we weren’t going to get any [crypto] ETFs.”
Kelly, who’s the CEO digital asset investment firm BKCM, believes that the earliest possible approval of a Bitcoin ETF could happen by February 2019. The Bitcoin Big Bang author went on to explain that the decision regarding the VanEck Bitcoin ETF proposal is expected to come at the end of September.
However, Kelly thinks that the SEC could delay its decision on the VanEck proposal to sometime next year. He also noted that the securities regulator had talked about fraud and manipulation in the cryptocurrency markets. According to Kelly, the SEC has been focusing on not just preventing market manipulation, but also being able to effectively “surveil it [through] arrangements with [cryptocurrency] exchanges.”
Moreover, the SEC thinks that the crypto futures market isn’t “mature enough”, which Kelly agrees with as well as he stated “that’s probably true at this time.” However, the BKCM founder added that the futures market is growing.
Looking at these developments, Kelly remarked, “As we get into 2019, we’ve got a much better shot at [Bitcoin ETFs being approved].”
He then analyzed the current growth of the CME bitcoin futures markets, noting that the “open interest of large holders [has been increasing] since April.”
In fact, Kelly pointed out that there has been a sizable 85% increase (or growth rate) in CME’s bitcoin futures contracts since April. He further explained:
“So, if you extrapolate that out, by February 2019 you’re going to have a very, very robust market in here. Add in something like the NYSE [New York Stock Exchange] Bakkt exchange that’s coming out...that’s going to [help increase the odds of a Bitcoin ETF being approved].” Brian Kelly
The BKCM founder then commented on SEC commissioner Hester Peirce’s recommendation that Bitcoin ETFs “need to approved sooner than later.” Given the added support from federal regulators such as Peirce, Kelly thinks
“we’re incrementally closer to getting a [bitcoin] ETF. And, the very positive thing was bitcoin didn’t selloff [after the recent rejections of bitcoin ETF proposals].” Brian Kelly
He also remarked that,
“So, if you extrapolate that out, by February 2019 you’re going to have a very, very robust market in here. Add in something like the NYSE [New York Stock Exchange] Bakkt exchange that’s coming out...that’s going to [help increase the odds of a Bitcoin ETF being approved]." Brian Kelly
“When a market doesn’t matter if it’s bitcoin or oil or anything [else] doesn’t selloff on the news that it should...that means there’s a sentiment change." Brian Kelly
In response to commissioner Peirce’s recent tweet stating that “yesterday’s staff orders [had] disapprov[ed] [Self-Regulatory Organization Rulemaking] SRO rules related to a number of bitcoin ETFs”, the CNBC contributor said the SEC will still be reviewing them along with other crypto-related proposals.
Kelly further remarked that the SEC will likely reflect on the 85% growth in the bitcoin futures market, but in his view, “whether or not the [SEC’s] decision to deny this is actually maybe at this point maybe inhibiting some people from investing in the proper investments.”
Notably, Kelly believes that if even one Bitcoin ETF proposal gets approved:
“it would be a huge deal [because] if you look at where the demand for this product is coming from, [which is] bitcoin and [other] cryptocurrencies...it’s from the retail investor. The institutional investors are knocking on my door, but they haven’t pulled the trigger yet. But, the retail investors has already said they want to buy this. They’ve already shown that last year [when the cryptocurrency prices reached record level highs]”. Brian Kelly
He added, “In retail accounts in the US, there’s about $50 trillion of [assets under management] AUM. That’s a lot of money. It would only take a small portion of that to go into a [bitcoin] ETF to spark a nice rally” on the flagship cryptocurrency.
However, when questioned if the market doesn’t react positively, or is indifferent, if and when a Bitcoin ETF is approved, Kelly said “that would be a problem”, but he’d be “very shocked” if that happened.