July 11, 2018
I believe strongly that listing a publicly available Bitcoin ETF would be in the interest of investors, the public, and the country. Thank you for considering the application.
From a technical and structural aspect many of the hurdles will now be cleared:
1. The ETF will hold physical bitcoin with holdings posted daily on their website
2. Pricing of bitcoin is extremely transparent and will be updated constantly
3. Baskets can be created for easy create and redeem
4. Custody of bitcoin will be in accordance with computer science best practices
A major concern has been the volatility and risk of bitcoin and cryptocurrency broadly:
1. Bitcoin and crypto is a going concern. The asset class is here to stay.
2. The asset class, in particular bitcoin, is extremely volatile and has downside risk. No doubt about that.
----However, as a multi asset class portfolio manager, the profile of bitcoin is extremely beneficial to investors. The correlation is low to negative to virtually all existing asset classes. This provides tremendous diversification benefits. Currently there are many ETFs in existence that share similar volatility and downside as bitcoin, but bitcoin may be the only to provide such tremendous diversification benefits to traditional portfolios.
3. Thousands of Americans are currently invested in bitcoin across a variety of centralized and decentralized exchanges. Their bitcoin is currently stored in a variety of ways. Risks to these investors include counterparty risk, custodial risks, theft/hack, and even something as simple as losing your hardware wallet. The crypto community is improving on reducing those risks, but they certainly still exist. By allowing investors to invest in an ETF you are PROTECTING these Americans by mitigating those risks. Given the bitcoin wave is only just beginning with no end in sight, the best way to protect investors is by giving them a safe vehicle to invest in.
Finally a bitcoin ETF will serve the national and public interest:
1. Crypto is a global phenomenon that will only continue to grow. First mover advantage is huge in technology. America needs to be leading from the front in terms of innovation and regulatory clarity.
2. Asset returns, particularly stocks and bonds, are projected to be lower over the next decade or so. By allowing investors the opportunity to invest a small portion of their portfolio in bitcoin it may give them the ability to grow their retirement. This would then reduce the monetary reliance on the government.
3. Investment in bitcoin is largely inevitable for thousands, potentially millions, of Americans. Therefore, it makes much sense to mitigate their risk by providing them a safe investment vehicle. At this point in time I would argue the largest risk an investment faces is NOT investment risk, but rather security related. The SEC can solve that via an ETF.
Again, thank you for your consideration.
Matt Hanna CFA, FRM, CAIA