Decade-Long Journey Ends with Bitcoin ETF Approval

• Decade-Long Journey for Bitcoin Exchange-Traded Fund Proposal
• Initial Industry Skepticism
• Early Responses from Industry Experts
• Signs of Industry Maturation
• Market Surveillance Mechanisms
• Unsuccessful Application but Lasting Impact
• Marking a Milestone

Decade-Long Journey for Bitcoin Exchange-Traded Fund Proposal

More than a decade has passed since the Winklevoss twins initially proposed a Bitcoin$42,260 -0.64% (BTC) exchange-traded fund (ETF) in July 2013. Although their application was ultimately unsuccessful despite several re-submissions, it provides an intriguing snapshot of the evolution and maturation of the industry.

Initial Industry Skepticism

At the time of the twins' initial proposal, Bitcoin's market cap had just exceeded $1 billion (it's now nearly $900 billion), with the cryptocurrency trading at approximately $87. Cameron Winklevoss' bold prediction that Bitcoin might someday reach $40,000 sparked substantial controversy. In 2013, The Financial Times reported widespread skepticism on Wall Street about the Winklevoss twins' proposal. Critics argued that Bitcoin was not a robust enough asset for the then-$2 trillion ETF market.

Early Responses from Industry Experts

Reginald Browne, a managing director at KCG Holdings at the time, expressed doubt about the viability of a Bitcoin ETF. Browne argued that an ETF needs to have some investment merit to succeed in the marketplace, an attribute he felt Bitcoin lacked.

Similarly, Morningstar suggested that the world didn't need a Bitcoin ETF because the underlying infrastructure couldn't meet the stringent institutional-grade requirements necessary to satisfy the SEC.

Signs of Industry Maturation

Contrasting the Winklevoss' 2013-2014 filings with recently approved S-1s shows clear signs of industry evolution and readiness for institutional-grade scrutiny. For instance, custody, an area of concern for the SEC, was rudimentary in 2013; however, filings for 2024 outline a more sophisticated custodian method, highlighting segregated cold storage, advanced private key management, and robust risk controls.

Market Surveillance Mechanisms

Successful filings for 2024 also feature market surveillance mechanisms. These mechanisms, which have evolved in sophistication, permit regulators and ETF providers to access detailed data about specific trades and traders in a more granular way, rather than merely broader market activities.

Unsuccessful Application but Lasting Impact

The SEC denied the Winklevoss' ETF application in 2017, citing the high risk of fraud and market manipulation. However, the twins remained involved in the industry and continue to support efforts to establish a Bitcoin ETF. Their company, Gemini, now provides custodian services for several Bitcoin ETF applications.

Marking a Milestone

Upon the eventual approval of a Bitcoin ETF, Cameron Winklevoss publicly celebrated the landmark event, which was over a decade in the making. His sentiment was echoed by Tom Lombardi, a former Managing Director at 3iQ, who launched one of the first Bitcoin ETFs in Toronto. The approval also coincided with the 15th anniversary of Hal Finney's running bitcoin tweet, one of the first public mentions of the world's largest digital asset.

Edited by Jonathan Stoker