The U.S. ETF industry has seen many milestones, but few stories are as dramatic as the decade-long battle to launch a Bitcoin ETF. While exchange-traded funds have been around since 1993 with the debut of SPY, the journey toward a Bitcoin ETF has been anything but smooth. From early rejections to regulatory roadblocks and market timing misfortunes, the road to approval has tested the patience of investors, innovators, and financial institutions alike.
The Long Wait for Approval
It all began in 2013 when Cameron and Tyler Winklevoss filed for what would become the first-ever Bitcoin ETF—the Winklevoss Bitcoin Trust. At the time, Bitcoin was trading around $90, and the idea of packaging cryptocurrency into a regulated ETF seemed visionary. The proposed fund, set to trade under the ticker “COIN” (now used by Coinbase), aimed to give mainstream investors direct exposure to Bitcoin through traditional brokerage accounts.
But the Securities and Exchange Commission (SEC) wasn’t convinced. The agency rejected the proposal—twice—citing concerns over market manipulation, volatility, and inadequate investor protections in the nascent digital asset space.
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The Winklevoss effort was just the beginning. Over the next several years, more than a dozen Bitcoin ETF applications were submitted and subsequently rejected. These ranged from spot Bitcoin ETFs—holding actual Bitcoin—to futures-based funds, leveraged products, and inverse strategies. Despite their varied structures, none met the SEC’s stringent criteria for market integrity and investor safety.
The Clayton Era: A Regulatory Wall
The turning point—or rather, the low point—came in August 2018, when the SEC rejected nine Bitcoin ETF proposals in a single day. Under then-Chairman Jay Clayton, the SEC maintained a firm stance: the cryptocurrency markets lacked sufficient oversight, transparency, and size to support a regulated ETF.
Clayton emphasized two major concerns:
- Market manipulation risks across unregulated crypto exchanges.
- Custody challenges, where physical Bitcoin could be lost or stolen, adding layers of risk beyond price volatility.
Even futures-based ETFs faced skepticism. Although Bitcoin futures were available on regulated platforms like CME and CBOE starting in late 2017, the SEC argued there wasn’t enough historical data to assess their long-term viability or size. Without evidence of a mature, liquid derivatives market, approval remained out of reach.
This era marked a period of stagnation. After 2018, new filings slowed to a trickle. The dream of a U.S.-listed Bitcoin ETF seemed all but dead.
A Shift in Momentum: The Gensler Era
Everything changed in 2021 when Gary Gensler took over as SEC Chair. Unlike his predecessor, Gensler—a former MIT professor with deep knowledge of blockchain technology—signaled openness to crypto innovation, provided it operated within existing securities laws.
In a pivotal speech at the Aspen Security Forum, Gensler acknowledged that Bitcoin futures ETFs could qualify for approval under the Investment Company Act of 1940, which offers strong investor protections.
“I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures,” Gensler stated.
The market responded instantly. Within two weeks, half a dozen new futures-based Bitcoin ETF filings were submitted. The race was back on.
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The Launch: BITO Makes History
On October 19, 2021, history was made with the launch of the ProShares Bitcoin Strategy ETF (BITO)—the first U.S.-listed Bitcoin ETF. Investor demand was explosive: BITO gathered $1 billion in assets in just two days, shattering previous records.
For many, this was a long-overdue victory. After nearly a decade of rejections, investors finally had regulated access to Bitcoin through a familiar vehicle.
Yet fate had other plans.
Just three weeks after BITO’s debut, Bitcoin hit an all-time high of nearly $69,000—then began a brutal correction. Over the next year, prices plunged by **76%**, dragging BITO’s assets from $1.4 billion down to just $500 million at its lowest.
It was a cruel twist: the very day investors gained access to a Bitcoin ETF also happened to be near the peak of one of the largest speculative bubbles in financial history.
Still, BITO performed exactly as designed. Its returns closely mirrored Bitcoin’s price movements, futures roll costs proved minimal, and no structural flaws emerged. For all its bad timing, BITO proved that a Bitcoin-linked ETF could work—even without holding actual Bitcoin.
Why Investors Still Want a Spot Bitcoin ETF
Despite BITO’s technical success, demand for a spot Bitcoin ETF remains strong. Unlike futures-based funds, a spot ETF would hold actual Bitcoin in secure custody, offering:
- Direct exposure to Bitcoin’s price.
- No need for monthly futures contract rollovers.
- Lower tracking error and long-term holding potential.
Such an ETF would give investors confidence that they’re owning real digital assets—not derivatives—making it more attractive to institutional players and long-term holders.
Grayscale has been leading this charge, fighting in court to convert its Grayscale Bitcoin Trust (GBTC) into a spot ETF. The case highlights a key inconsistency: while the SEC has approved futures-based products, it continues to block spot applications—a move critics argue lacks logical consistency.
Current Outlook: Caution Amid Crisis
Today, the path to a spot Bitcoin ETF remains uncertain. The collapse of FTX in late 2022 reignited concerns about fraud, custody risks, and market integrity in crypto—a reminder of why regulators remain cautious.
As a result, the SEC appears likely to stick with futures-based Bitcoin ETFs and blockchain equity ETFs for the foreseeable future. Any new crypto-related products will face intense scrutiny.
Still, momentum is building. With increasing institutional interest, improving custody solutions, and growing regulatory clarity worldwide, a spot Bitcoin ETF may not be far off—even if it doesn’t arrive in 2025.
After all, it took 10 years just to get the first Bitcoin ETF approved. The next breakthrough may come sooner than expected.
Frequently Asked Questions (FAQ)
Q: What is the difference between a spot Bitcoin ETF and a futures-based Bitcoin ETF?
A: A spot Bitcoin ETF holds actual Bitcoin directly in custody and tracks its real-time price. A futures-based ETF invests in Bitcoin futures contracts traded on regulated exchanges like CME and must roll these contracts periodically.
Q: Why hasn’t the SEC approved a spot Bitcoin ETF yet?
A: The SEC cites concerns over market manipulation, custody risks, and lack of surveillance-sharing agreements with major crypto exchanges as key reasons for delaying approval.
Q: Did BITO fail as an ETF?
A: No. Despite poor market timing and declining assets during a bear market, BITO functioned as intended—accurately reflecting Bitcoin’s price performance without structural issues.
Q: Can investors trust futures-based Bitcoin ETFs?
A: Yes. These ETFs are regulated, transparent, and backed by CME-traded futures with clearinghouse guarantees—making them safer than unregulated crypto exchanges.
Q: Is Grayscale likely to win its lawsuit against the SEC?
A: Legal experts suggest Grayscale has a strong case based on inconsistent regulatory treatment compared to other approved commodities ETFs. A favorable ruling could accelerate spot ETF approvals.
Q: When might a spot Bitcoin ETF be approved?
A: While no timeline is certain, increased legal pressure, improved market infrastructure, and global precedents (like Canada’s success) suggest approval could happen within the next few years—if regulatory conditions allow.
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