Announcing a Return to our Roots: The All-New Bitcoin Magazine

Bitcoin Investment Trust Ups Its Proposed IPO But Approval Is Still In Question

by

         Bitcoin Investment Trust Ups Its Proposed IPO But Approval Is Still In Question

On January 20, 2017, Grayscale Investments LLC filed for an initial public offering (IPO) for its Bitcoin Investment Trust to be listed on the NYSE Accra exchange in an attempt to bring bitcoin investing to the masses through a publicly tradable investment vehicle in the form of a new stock.

Grayscale Investments, the investment management subsidiary of the Barry Silbert-led Digital Currency Group, established the Bitcoin Investment Trust (BIT) in 2013, hoping to provide investors with the opportunity to invest in the digital currency bitcoin without having to purchase and securely store the digital currency themselves.

The Bitcoin Investment Trust, which carries the ticker GBTC, tracks the TradeBlock XBX Index 24-hour VWAP bitcoin index and charges a 2 percent annual management fee. The Trust currently has around $262 million assets under management. Shares in the Bitcoin Investment Trust can be traded over-the-counter and can be held in traditional investment accounts, such as IRAs and Roth IRAs.

By going public, Grayscale Investments wants to open up its bitcoin investment vehicle to a broader investor base that prefers the comfort of investing in an exchange-traded and fully regulated security.

On May 4, 2017, Grayscale Investments LLC submitted an amendment to its IPO filing with the SEC increasing the size of its proposed IPO from $500 million to $1 billion dollars suggesting that the interest in a publicly-tradeable and regulated investment vehicle that tracks the price of bitcoin would see substantial interest from institutional and private investors.

However, given the SEC recent decisions not to approve the long-awaited Winklevoss Bitcoin ETF (COIN) as well as the SolidX Bitcoin Trust, the chances for the Bitcoin Investment Trust’s IPO to gain regulatory approval are not high.

While Alan Friedland, founder and CEO of Compcoin, doesn’t hold much hope for the ETF approval just yet, he agrees that there is enough demand from established institution investors for bitcoin as an alternative asset class to merit the $1 billion IPO increase.

“Digital coins will be the fastest growing financial market and we are projecting a 1.7 trillion dollar market cap by 2025,” he told Bitcoin Magazine.

When the SEC announced in March that it would not approve the two proposed bitcoin exchange-traded funds, the regulator stated that a bitcoin ETF would require "surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated."

Since these conditions are still not met for bitcoin, an approval of the Bitcoin Investment Trust looks rather unlikely.  

Spencer Bogart, analyst at Blockchain Capital, thinks that it is “highly unlikely” that this renewed ETF consideration will be approved. “The SEC disapproved the prior two ETFs not because they took issue with the structure of the fund but because the SEC currently considers the major markets on which bitcoin is traded to be too unregulated,” Bogart told Bitcoin Magazine. “Given that this hasn’t changed since the last disapproval, the SEC is unlikely to offer a different response.”

Bogart is more optimistic about the chances of an ETF approval outside of the United States. “I think mainstream investment products will first be approved by foreign regulatory agencies (to some extent this has already happened). In regards to the approval of a U.S.-listed Bitcoin ETF, I think it’s more likely that the SEC changes its view (e.g. with regime change) than it is that the Bitcoin ecosystem changes such that the majority of activity flows to highly regulated markets.”

Recommended

Morgan Creek Bags $40M Raise, Attracts Industry First Funding From Pensions

Two pension plans from Fairfax County, Virginia, the $1.43 billion Police Officer’s Retirement System and the $3.9 billion Employee’s Retirement System, were the lead investors.

Colin Harper

Bitcoin Price Analysis: Strong Rally Set to Test Overhanging Resistance

There are major resistance levels to consider when viewing the health of the bitcoin market, but given the strength of the current move, it seems likely we will see a continuation of the uptrend in the price of bitcoin.

Bitcoin Schmitcoin

Abra Users Can Now Buy Stocks and ETFs Using Bitcoin

According to Abra CEO Bill Barhydt, everyone should have access to capital markets, regardless of where they live in the world or the amount of capital they have at their disposal. This is where Bitcoin comes in.

Jimmy Aki

Op Ed: Should You File a Foreign Bank Account Report for Bitcoin Holdings?

An American who owns a financial interest (like bitcoin) worth $10,000 or more, or has signing authority over a foreign financial account, doesn't necessarily have to actually pay taxes on them. But they must let the IRS know about them.

Sasha Hodder