Despite an almost 50% drop in the value of Bitcoin between mid-April and the end of June and crackdowns in the UK and China, Ric Edelman, founder of Edelman Financial Engines and RIA Digital Assets Council, remains optimistic about cryptocurrencies. He also expects the Securities and Exchange Commission to approve a Bitcoin ETF.
“It’s not a question of if but when,” said Edelman, who recently hosted a webinar with guest Ben McMillan, founder and chief investment officer of IDX Digital Assets.
A dozen asset managers have filed applications with the SEC to launch a Bitcoin ETF. The agency has rejected some of these filings in the past and more recently deferred decisions on a handful of them, including the VanEck Bitcoin Trust for which the SEC has twice delayed a decision.
SEC Chairman Gary Gensler has said that more investor protection is needed for the cryptocurrency market, which he calls a “speculative asset class,” but the SEC does not. power to regulate cryptocurrency exchanges.
Edelman isn’t fazed by the SEC’s delays and even put a positive face on the UK Financial Conduct Authority banning UK operations of Binance, the world’s largest cryptocurrency exchange, and China’s recent crackdown. against crypto mining, which was the catalyst for Bitcoin’s recent sell-off, according to McMillan.
“China’s decision to ban mining is a bullish signal for the United States and Bitcoin,” said Edelman. “The miners will come to the United States [which will] introduce new opportunities for regulators to engage. It is a competitive environment. The Chinese are pulling out of the market, although they are likely to change their mind again.
The Chinese decision “highlights the geopolitical nature of crypto,” McMillan said.
In the United States, regulators are examining vulnerabilities in crypto exchanges, Edelman said, adding that he “would not be surprised to see limits on leverage on exchanges based in the United States.” In China and in Binance’s UK operations, the leverage could be excessive, according to McMillan.
Stablecoins, crypto trusts and future plans
He noted that stablecoins, which can be backed by some type of collateral, including fiat currencies such as the dollar, “have exploded in popularity” among those who want to be in the crypto market but with less risk. . But that’s only the early days for stablecoins and some, including Tether, which is not fully guaranteed, broke their parity of $ 1 per coin during the May 2021 big crypto sell-off, said. McMillan.
“Stable coins are the most obvious opportunity for federal regulation” that would treat stablecoins like money market funds, Edelman said. “It’s inevitable.”
McMillan’s IDX currently manages two private and open-ended crypto trusts – the IDX Risk-Managed Bitcoin Trust and the IDX Risk-Managed Ethereum Trust – which invest in their respective cryptocurrencies and liquidity, managing the exposure in risk based. Crypto trusts are long 60% to 70% of the time, but are currently all in cash, McMillan said.
IDX is currently working on bringing a long-term DeFi (decentralized finance) trust to market, which will be diversified with around a dozen different coins represented in the DeFi ecosystem.
When asked when the Bitcoin Trust IDX would return to Bitcoin, McMillan said after Bitcoin established a price floor. He couldn’t determine an exact price point for the re-entry, but said he would consider “putting risk back on the table” if Bitcoin continues to appreciate and climbs to around $ 40,000.
Bitcoin has gained nearly 20% over the past four days and is now trading around $ 36,000.
Edelman said his current stake in Bitcoin and that of his wife is “north of the 1% allocation” they took years ago. He said later this year and in 2022 that he would disclose his approach to asset allocation to digital assets. “We believe very strongly in diversification – coins, tokens, a variety of funds and companies… Diversity wins.”