The SEC has filed an application to create an ETF for digital assets. How will this help the cryptocurrency market?

Asset manager VanEck has filed an application with the US Securities and Exchange Commission (SEC) to create a digital asset ETF. With this move, VanEck opens up an opportunity for institutional investors – that is, large organizations – to gain access to the shares of companies that generate most of their capital from cryptocurrency-related activities.

These include PayPal. According to a recent report by BTIG financial firm analyst Mark Palmer, the company’s shares are becoming more attractive to buy due to its active participation in the life of the cryptocurrency market.

To begin with, we recall that VanEck regularly submits applications to the US Securities and Exchange Commission. The last time this happened was in early January, when representatives of the organization reaffirmed their desire to launch an ETF on Bitcoin. This has not happened since September 2019, that is, the leadership is clearly betting on a change of government in the United States and, in particular, a change in the leadership of the Commission.

Thanks to ETFs, traders in the stock market will be able to make money on changes in the rates of Bitcoin and other cryptocurrencies. Prior to that, all orders of the company were blocked, since the coins are considered too volatile – that is, with sharp changes in rates. Well, this creates conditions for the loss of investors’ funds.

Now the situation has really changed. Still, former SEC chairman Jay Clayton left the organization, and it was he who actively opposed the launch of the Bitcoin ETF. In this regard, representatives of the company are becoming more and more active.

When will the crypto ETF launch?

The new ETF will track the performance of the so-called MVIS® Global Digital Assets Equity Index, which reflects the evolution of the digital asset industry. This includes companies that operate cryptocurrency exchanges, payment gateways, and mining centers. They also include firms with large holdings of cryptocurrencies, Decrypt reports.

That is, this tool will allow you to invest in companies that are associated with cryptocurrencies, but not invest in the coins themselves. This is suitable for more conservative investors and, for example, various funds that can scare off some of their clients through direct investment in cryptocurrencies.

To get into the index, companies must generate more than 50 percent of their income from cryptocurrency projects. Recall that at least several organizations in the cryptocurrency space are considering going public – that is, an IPO – including Coinbase and Bakkt. It is possible that the fund may include their shares in futures if the IPO is successful.

The list of companies that will influence the new ETF may be joined by the PayPal payment platform, which integrated Bitcoin and several other cryptocurrencies into its services last fall. According to Mark Palmer, analyst at the financial company BTIG, the active involvement of PayPal in the crypto world makes the company’s shares an attractive investment. He raised the attractiveness of PayPal securities from neutral to a buy recommendation by setting a target price for the share in the region of $ 300.

At the time of writing, PayPal is trading at $ 252.

In an address to investors earlier this week, Palmer said PayPal’s strong support for its cryptocurrency initiatives could lead to more than a billion dollars in annual revenues for the fintech company by 2022. So, as we can see, the crypto market has ceased to be a «sandbox» for investments by individual amateur investors. Now large companies and organizations are engaged in its development. With their involvement, you can safely bet on the further improvement of the position of Bitcoin and the growth of its popularity among investors.

We believe VanEck should succeed in this initiative. The company has been applying for ETF launches for a long time and has previously faced only rejections. Now the US leadership has changed, so this niche can be viewed from a completely different angle. In addition, in 2020, many companies contacted Bitcoin and invested hundreds of millions of dollars in cryptocurrency – and this has a good effect on the reputation of BTC.

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