In a recent interview, Elliot Johnson of Evolve ETFs, a Canadian investment firm that manages the EBIT spot Bitcoin ETF, discussed the crucial factor that could lead to BlackRock’s success in obtaining its Bitcoin ETF. Johnson emphasized the importance of BlackRock’s surveillance agreement, which sets it apart from other filings.
According to Johnson, the distinctive aspect of BlackRock’s filing is the surveillance agreement between Coinbase and NASDAQ. This agreement enables regulators to monitor Bitcoin trades, ensuring the necessary oversight and integrity in the marketplace. The requirement for surveillance of a venue of significant size, where the underlying asset of the ETF is traded, is fulfilled by Coinbase, which checks all the boxes. The surveillance mechanism is facilitated through NASDAQ’s existing technology.
This surveillance agreement could give BlackRock an advantage in the ETF approval process. However, Cathie Wood’s recent amendment to the 21Shares spot Bitcoin ETF filing also includes a similar surveillance-sharing agreement, originally filed in April. This move by Wood appears to be an attempt to outmaneuver BlackRock. Johnson’s insights affirm Wood’s analysis and bullish sentiment regarding the approval of a spot Bitcoin ETF.
The SEC’s View on Bitcoin and the Role of Coinbase
Johnson also discussed the Securities and Exchange Commission’s (SEC) perspective on Bitcoin, highlighting that it is considered a commodity rather than a security. The presence of a major exchange like Coinbase, providing trading data to NASDAQ, further strengthens the case for BlackRock’s Bitcoin ETF approval.
For years, the SEC has been hesitant to approve Bitcoin ETFs due to concerns surrounding surveillance and potential manipulation in the underlying spot market, where most Bitcoin volume is traded, often outside the U.S. The distinction between the futures market and the spot market has been a subject of ongoing debate.
The Importance of a Transparent and Regulated Index
During the interview, Johnson emphasized the significance of a transparent and regulated index for a Bitcoin ETF to function effectively. He cited CF benchmarks as an example of such an index, which is highly regulated, eliminates price manipulation, and ensures a fair and efficient price. This feature is crucial for BlackRock’s Bitcoin ETF to operate without slippage.
The introduction of BlackRock’s Bitcoin ETF, featuring a robust surveillance mechanism, has the potential to be a turning point in the cryptocurrency space. Johnson predicts that if BlackRock’s Bitcoin ETF is approved, professional investors will start considering Bitcoin as an essential asset for their portfolios.
Reflecting on the changing sentiment among investors, Johnson mentioned the shift since 2017, when Bitcoin was seen as a career risk. In 2021, investors are acknowledging the career risk of ignoring Bitcoin and expressing a strong interest in understanding the cryptocurrency. Johnson predicts that soon, not owning Bitcoin will be perceived as “too much career risk.”
BlackRock’s surveillance agreement, along with the SEC’s view on Bitcoin and the importance of a regulated index, all contribute to the potential success of a Bitcoin ETF. The integration of Bitcoin into existing financial infrastructures is seen as an optimistic future by Johnson, where Bitcoin becomes a key asset in the industry.