Exchange-traded funds (ETFs)in Canada have faced major issues during the crypto market crash. This has raised alarm concerning the possible approval of Bitcoin ETFs in the US, waiting for approval from the Securities and Exchange Commission (SEC).
Two Canadian Bitcoin ETFs have issued a warning to investors regarding a market disruption caused by the crypto market plummeting. The market crash has heightened the risk associated with these investment vehicles.
Why bitcoin futures trading was halted
Bitcoin lost nearly a third of its value on Wednesday, falling as low as $30,000 on some exchanges. The sharp decline triggered a curb in crypto markets, and the Chicago Mercantile Exchange briefly halted trading activities related to two Bitcoin funds run by Horizons ETFs Canada.
After the halt, Horizon Funds sent an alert to their market makers that they would be unable to fulfil their buy and sell orders if the price for the futures stayed at its lower limit at the end of trading hours.
According to the Chief Executive for Horizon Funds, Steve Hawkins, the ETF provider was “on high alert at 9.00 a.m”.
“We had to put in place all the business continuity plans for these ETFs,” said Hawkins. Fears about the problems created due to the volatility of the underlying asset of crypto ETFs appears to borne out by recent events, although Horizons says it makes those dangers clear to retail investors. “I’m hoping this has opened the eyes of the retail investing public to understanding how volatile this asset class is,” Hawkins said.
Does This Make US Bitcoin ETF Less Likely?
This uncertain situation with ETFs has led to renewed pessimism regarding the launch of crypto ETFs in the US.
The country’s securities regulator, the Securities and Exchange Commission, in April postponed the review of at least one crypto ETF proposal until Mid-June. However, the SEC cautioned investors about the high risk associated with Bitcoin and other crypto investments.
There are at least 11 crypto ETF proposals that have been submitted to the SEC. Canadian listings of financial products is often seen as a precursor to the US following on later. But SEC caution may have been further heightened by the ongoing crash in prices, which is seeing bitcoin resume its slide today, currently priced at $36,800 going into the weekend.
The two Horizon ETFs, both priced in Canadian dollars, enable traders to speculate on Bitcoin prices using a regulated investment. Horizon’s funds are among the clutch of Bitcoin and Ethereum ETFs that launched on the Toronto Stock Exchange earlier this year.
The ETFs were welcomed by the crypto industry for their role in helping to widen the options available to retail investors seeking regulated exposure to crypto products.
Horizon ETFs are based on futures as opposed to directly holding bitcoin as some of the other Canadian bitcoin ETFs do, and despite the current turmoil in the crypto market, Hawkins stated there was an increased interest in the ETFs.
However, he also disclosed that crypto investments are still highly risky and that traders needed to know this before investing.
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