European Investors Outpace Americans in Race to Bitcoin, but That May Soon Change

Last month, Fidelity reported that European institutional investors hold nearly twice as much crypto as their American counterparts. And with zero-interest-rate policies taking over, U.S. funds may soon try to fill this gap with Bitcoin. There’s just one problem.

The cryptoverse has long heralded the moment institutional investors join the Bitcoin bandwagon. 

It would be a 0 to 1 moment, a binary shift from obscure Internet money to a dominant market force. And though commentators celebrated the entrance of Renaissance Tech and Paul Tudor Jones, the trend hasn’t caught on. 

Part of the problem has been access. Though both of the funds mentioned above are exposed to BTC, neither is actually holding Bitcoin. They are instead trading futures from the Chicago Mercantile Exchange (CME). 

Launched in 2017, the CME Bitcoin futures were the first bridges to traditional finance. It was easy to understand, and money managers recognized the asset even if they didn’t fully understand the underlying commodity. The BTC futures indicated that the crypto market was maturing.

The launch inspired other firms like VanEck, Bitwise, Wilshire Phoenix, and the Winklevoss Twins to try their hand at even more products. So far, no firm has successfully landed a filing. 

The SEC has time and again rejected every single exchange-traded fund (ETF). Their primary concerns have been market volatility and market manipulation. 

Wilshire Phoenix’s product took these two points to heart when filing for a Bitcoin ETF back in 2018. The United States Bitcoin and Treasury Investment Trust balanced Bitcoin and U.S. Treasury bills to address SEC’s volatility concerns. 

More importantly, though, Wilshire’s product was built on top of the already regulated CME futures, specifically its Bitcoin Reference Rate (BRR). The CME’s independent oversight committee also reviews this rate periodically to ensure its integrity. This would help mitigate market manipulation across several top exchanges.

Despite checking all of the regulatory boxes, the SEC blocked what appeared to be a near-perfect application. Hester Peirce, the agency’s commissioner, said that the SEC’s decision “evinces a stubborn stodginess in the face of innovation.” It was one of the first times that a commissioner has ever made such a statement.

But with so many companies being rejected despite their responsiveness and perseverance, Peirce’s letter raises legitimate points. 

Wilshire hasn’t given up either; in June, they filed for a publicly-traded fund. A wholly new product, the Bitcoin Commodity Trust, would be made up of only Bitcoin and, if approved, would trade on OTC desks like any other security. 

In an interview with Crypto Briefing, Garrette Furo, a partner at Wilshire, said:

“We are trying to give the market what it deserves. Investors will have exposure to Bitcoin via publicly-trader shares using more familiar, traditional brokers. There are no confusing custodial concerns to worry about. Investors just want access to what we believe is a valuable financial asset and we want to solve this.”

The filing is still under review, but Furo looks forward to working with the SEC should they have any comments on the filing. If approved, the product would offer investors a similar opportunity to Grayscale’s Bitcoin Trust (GBTC). 

Though popular, interested investors pay a hefty premium to enjoy access. At the time of press, purchasing the equivalent of one BTC via Grayscale will cost investors $10,071, a $782 markup.   

Retail investors in the US are currently getting ripped off by @GrayscaleInvest's Bitcoin trust due to the premiums. #GBTC makes sense if you're an institutional investor and create shares at NAV … otherwise