Fidelity is launching an ETF tracking the price of Bitcoin, WSJ reports.
Why It Matters: Bitcoin’s second boom has come with an explosion into mainstream finances, but it still has a ways to go before cementing its place in our financial system. Though, it certainly hasn’t hurt to see companies like Square and Tesla, along with other financial institutions invest in or express confidence in Bitcoin. Fidelity’s move crystallizes its own efforts to bring Bitcoin to the mainstream.
- Fidelity was an early champion of Bitcoin’s market potential, with CEO Abigail Johnson pushing the idea.
- Other companies getting into the fold include Bank of New York Mellon, Northern Trust and Standard Chartered.
The Details: It’s called the Wise Origin Bitcoin Trust and “will aim to match an index that takes spot prices from various bitcoin markets, including popular exchanges, Fidelity said in a securities filing.”
- The fund’s custodian will be Fidelity Digital Assets.
The Hiccup: Wise Origin Bitcoin Trust, like an ETF, requires the SEC’s approval. The regulator has “repeatedly rejected applications for bitcoin ETFs, blocking investors from buying into the market through a financial vehicle whose low fees and tax advantages have helped upend the way stock and bond funds are sold. But the industry remains hopeful some funds will eventually break through.”
- The SEC rejected nine different Bitcoin ETFs in 2018.
While great news for Bitcoin, it remains to be seen if the SEC will approve Fidelity’s ETF as the first Bitcoin ETF in the U.S.
I’ve been getting a lot of questions about what will happen to Grayscale Bitcoin Trust ($GBTC) once competing ETFs come out and my opinion is that $GBTC should trade at around net asset value (NAV), plus or minus a percent. Right now it’s trading at an almost 10% discount to NAV!
At the end of the day, it’s a trust that holds bitcoin. $IAU is one of the largest publicly traded gold trusts and trades at 99.3% of NAV, despite there being many direct competitors in a mature market.
I also have seen reports of many arbitrage desks selling bitcoin and buying GBTC to profit on closing the gap.
In summary, I think $GBTC is still a great way to buy into Bitcoin right now if you believe in the long-term potential of it, but would rather have exposure to it in a traditional brokerage or retirement account.