Mar. 23, 2022
Greetings, I strongly support Grayscale’s application to convert GBTC to a spot Bitcoin ETF. It makes no sense to allow Bitcoin ETFs based on the futures market while denying an ETF based on the actual commodity. The agency’s thinking seems to be that the futures market is US regulated, while the Bitcoin markets are not. This is a meaningless distinction. If the futures markets are not dependent upon and derivative of their underlying commodity, then what exactly are they? If the underlying commodity market is manipulated, then how can the futures market not be affected? Having already accepted this risk by allowing futures-based ETFs, you cannot use it to deny spot ETFs. Rather, the futures market actually introduces a serious manipulation risk to the underlying Bitcoin market. Because they are cash-settled “paper” Bitcoin, they can be used to manipulate the real Bitcoin market by allowing the equivalent of an unlimited amount of leveraged naked shorting. This goes against the fundamental idea that the total amount of Bitcoin available is both limited and predictable. The agency is not protecting US investors from the risks of the Bitcoin market by denying this application. GBTC has been already been available for anyone to purchase on the open market for years. There are many other readily available Bitcoin vehicles, including several foreign spot Bitcoin ETFs. Allowing only futures-based Bitcoin ETFs means that investors are only allowed to choose between inferior ETF products. First, these ETF will have to continually roll their investments forward to each new front month – an unnecessary and non-trivial cost for investors. Second, as these ETFs grow large enough, they will run into CME position limits on the front month. Presumably they will then start owning further and further out into future months, distorting the ETF even more compared to the underlying commodity. I urge you not to deny Grayscale’s spot Bitcoin ETF application. Terry A Barnes Redwood City, California