Is a #Bitcoin ETF Next??

etftrends logo imagesCourtesy of ETF Trends’ Tom Lydon

Bitcoins, a type of highly encrypted digital currency, are surging on a wave of speculation and demand for alternative currencies as central banks continue to print.

Could we soon see the launch of a Bitcoin ETF? It’s an interesting idea, but experts say don’t hold your breath.

Bitcoins, which trade hands online, have surged over 14% in the past week, reports Jeff Cox for CNBC. The digital currency has jumped to $250. The Bitcoin is a type of decentralized digital currency based on a peer-to-peer network and can be exchanged through computers internationally without a financial intermediary. The system was first introduced by developer Satoshi Nakamoto in 2009.

As the digital currency gains momentum, some have floated the idea of a ETF backed by Bitcoins. Alternatively, Bitcoins could be a candidate for the exchange traded note structure, but the sponsoring bank would have to be willing to back the appreciation or depreciation of the Bitcoin currency. What started off as a joke, may not seem like a joke at all.

“With global BitCoin exposure north of $2 billion and global currencies on the verge of a valuation war one has to wonder how this new asset is going to make its way into our lives,” said Chris Hempstead, director of ETF execution services at WallachBeth Capital.

Nevertheless, Hempstead does not believe Bitcoins can be structured to fit the ETF vehicle. For instance, if a Bitcoin ETF were to act like another currency offering, it would require futures contracts.

“You’d need securities that are based in Bitcoins,” Hempstead said. “Since the Bitcoin is unregulated and no futures exist, an ETF is not possible today.”

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