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Will This Be The First Ever All-Crypto ETF?

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Nothing quite captures the imagination of the crypto community like a security that can be traded on ordinary stock exchanges, or even across over-the-counter markets.

So it’s perfectly reasonable that a section of the bitcoin community might be a bit crestfallen after the SEC recently put off the decision of whether to approve five bitcoin-related ETFs (exchange traded funds) until September 21, 2018, due to limited public participation.

Incredibly, the SEC said that so far it had only received two comments on the proposed ETFs, a clear indication of marked apathy by the public.

But on a brighter note, none of the proposals being put on hold are from the famous VanEck and SolidX duo. The proposed SolidX ETF has been seeing plenty of public enthusiasm with more than 100 comments already submitted.

But there’s an even better reason to feel upbeat about the whole crypto ETF thing. A new SEC-regulated ETF that seeks to track not just bitcoin but the top 10 cryptocurrencies is about to hit the market. An ETF is marketable security that tracks a group of assets, usually stocks, and is traded on ordinary exchanges such as the NYSE or NASDAQ.

First All-crypto ETF

The newly proposed Bitwise HOLD 10 Cryptocurrency Index will track 10 cryptocurrencies in the Bitwise HOLD 10 Private Index Fund that was launched in November.

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The Hold 10 Index captures about 80 percent of the total market cap of the crypto market, making it pretty similar to the S&P 500 Index (SPX) and a good proxy of the entire crypto universe. That’s an important difference from all other proposed ETFs currently under review by the SEC because they all seek to track bitcoin in one way or other.

For instance, the five ETFs that have been postponed are by Direxion Asset Management. Of the five, one is designed to seek a straight up negative correlation with bitcoin; two will amplify bitcoin’s upward movements (for the bulls); while the other two will amplify downward movement (for the bears). Their names are:

• Direxion Daily Bitcoin 1.25X Bull Shares

• Direxion Daily Bitcoin 1.5 Bull Shares

• Direxion Daily Bitcoin 2X Bull Shares

• Direxion Daily Bitcoin Bear 1X Shares and

• Direxion Daily Bitcoin 2X Bear Shares

In other words, four of the five proposed Direxion ETFs are leveraged funds—something that some experts have termed insane due to crypto’s already extreme volatility.

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The latest crypto ETF has no such complexities. In fact, you could even argue it’s less risky than any of the proposed bitcoin ETFs because it’s considerably diversified. Ok, diversification in the context of the crypto market has to be taken with a grain of salt because many cryptocurrencies tend to be highly correlated with bitcoin, moving almost in lockstep with the leading crypto.

But altcoins are beginning to develop a mind of their own and becoming increasingly decoupled from bitcoin. For instance, of the top 10 cryptos by market cap, bitcoin has moved up over the past 24 hours along with three other altcoins while the other six are down.

A big reason why the SEC rejected the first proposed Winklevoss ETF in 2017 was due to what it viewed as the risk of exposing investors to manipulative practices. It’s much easier to manipulate a single cryptocurrency (as is often claimed about bitcoin) than a basket of 10 containing of them.

By Alex Kimani for Safehaven.com

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