FTX Crash Not Important for a Bitcoin ETF (Exclusive)

The past couple of weeks have shaken the cryptocurrency industry to its core. FTX filed for bankruptcy following a massive liquidity crisis and inability to meet customers’ withdrawal requests.

With all eyes in that direction, CryptoPotato had the chance to speak with Matthew Sigel – Head of Digital Asset Research at VanEck, during Token2049 in London.

In this interview, we talk about the impact of the FTX fallout on the prospects of a Bitcoin ETF, how VanEck was able to minimize damage, as well as the realistic odds of having an ETF backed by physical BTC under current SEC leadership.

FTX Fiasco Not important for a Bitcoin ETF

For those unaware, VanEck is a family-owned business within traditional asset management. Sigel said they are a “top 10 ETF sponsor with approximately $60 billion in assets under management” and that a large majority of their funds are in passive ETFs such as the Gold Digger ETF – GDX.

It is because of their large gold exposure that the company’s CEO – Jan van Eck – is “very keen on Bitcoin’s potential disruption.”

In 2017, we were among the first to apply for a physically backed Bitcoin ETF. And while that application has been repeatedly denied, we have spent time, resources and manpower investing across the space from a private perspective, from our own balance sheet.

We have relationships with a number of early-stage venture capital firms, we own a stake in one of them, and we have invested privately for several years.

Commenting on the current situation involving FTX’s meltdown and the way it would affect the prospects of a Bitcoin ETF, Sigel was positive that it doesn’t matter.

For a Bitcoin ETF specifically, I don’t think the events of the last couple of days (read: FTX issues) matter. I think Bitcoin is unique, even in the eyes of legislators.

But there is still a catch.

No Bitcoin ETF under current SEC administration

While we were on that subject, we also discussed the odds of getting an SEC-approved physical-backed Bitcoin ETF.

Unfortunately, Sigel believes that they are very thin under the current leadership of the Securities and Exchange Commission. When asked if he thinks we are getting close, he said:

No. There’s a very clear obstacle at the top of the SEC, and it’s a president who so far has shown confidence in that SEC chairman. As long as he (read: Gary Gensler), the chances of a physically backed Bitcoin ETF are nil.

Additionally, he confirmed that to get there, regulators need to step up, and so far legislation in the crypto space has been slow.

VanEck Minimized FTT exposure before FTX Crash

In some of VanEck’s most actively managed strategies, the company has a very active risk management process.

The expert said they could “hold quite a lot of money if macro and market conditions warrant it.”

Commenting on the ongoing fiasco with FTX and the collapsing price of the FTT token, which used to be one of the leading cryptocurrencies by total market capitalization, Sigel said VanEck was able to minimize exposure by selling early.

There was a build up to this event and we were able to minimize a good portion of the token specific damage by exiting some positions.

Talking about their actively managed strategies, he explained that there are a number of them based on the different levels of risk and return, and gave an example with one called “the smart contract manager index”, which consists of layer one, and Ethereum is generally around 30% of that and their strategy appears to meet or beat the performance of the index.

In closing, he shared three key takeaways from the entire fiasco, namely:

• Higher emphasis on self-deposit in the margin.
• Clear demarcation between exchanges and their market makers.
• Proof-of-reserves for centralized exchanges.