Hashdex is one of the world’s largest crypto asset management companies. They offer novel crypto securities such as Bitcoin ETF, Crypto Index ETPs, and other investment management services. In the proposed crypto index ETF of Hashdex, they mentioned 3 additional potential future investment assets besides Bitcoin (BTC) and Ethereum (ETH), including Litecoin, which is very good news for seasoned Litecoin investors, and novice users who are trying to get their hands on cryptocurrencies.
Key Takeaways
- Hashdex asset management company mentions that Litecoin has the potential to be an ETF in their new Crypto ETF proposal.
- The Litecoin Price surged for a short time due to potential ETF rumors.
- Canary Files, another asset management company is awaiting the SEC’s decision on their proposed Litecoin ETF.
What is a Crypto ETF?
Crypto ETFs (Exchange Trade Funds) are securities that help users to invest in cryptocurrencies without actually holding them. Here, an institutional investor offers ETFs that are backed and regulated by the US SEC agency. These funds track the value of underlying cryptocurrencies through futures contracts. Additionally, there also spot ETFs, which pose a greater investor risk, and also need to jump off of a lot of regulatory hurdles.
The SEC has long stood against ETFs, which only changed early this year under pressure from the court ruling. On January 10, 2024, the SEC approved 11 spot Bitcoin ETFs. As of now, only Bitcoin and Ethereum ETFs are approved by the SEC. However, rumors and news are coming out that institutions are trying to expand the crypto ETF chest box by introducing other altcoins to the mix.
Possibility of Litecoin ETFs
As stated above, creating an ETF is not an easy process. It has to overcome several regulatory hurdles to get approved by the SEC. Cryptocurrencies considered for creating ETFs should follow certain eligibility criteria. Hashdex’s proposed Crypto Index ETF plan, mentions altcoins such as Litecoin, Avalanche, and Chainlink have the potential to become one along with Bitcoin, and Ethereum.
So, institutional investors are seeing the potential of Litecoin, which is especially good for the existing, and upcoming Litecoin investors. However, the document from the SEC archives clearly states that the information provided in the prospectus might be incomplete, and the proposed plan should not be construed as a future promise. So, even though Litecoin may become an ETF or a part of an ETF index, it all depends on the SEC regulations and decisions.
What are the Benefits of Crypto ETFs?
ETFs have been an integral part of traditional markets that make it possible for investors to buy various securities in a single transaction. This diversity allows investors to diversify their portfolios and limit risks. So, the benefits of ETFs in the traditional market are obvious. But when it comes to crypto, what benefit does it bring to the investors, more than what the crypto market can? Let’s see:
- Easy Accessibility: Purchasing and storing cryptocurrencies from the exchanges requires some technical knowledge. Especially when you consider the different types of exchanges and wallets present in the market. On the other hand, ETFs are sold on the regular stock exchanges, which most of the investors are comfortable with.
- Better Liquidity: Crypto ETFs widen the exposure of cryptocurrencies to an entirely different market. The easiness of buying and selling the shares of an ETF fund may reflect on value and liquidity of the underlying asset.
- Trust: Even the most successful stock market icons such as Warren Buffet, did not have a favorable opinion about crypto holdings. Many traditional investors are still weary about the long-term future of cryptocurrencies. However, crypto ETFs bring a level of protection to the investors. They are regulated by the SEC, and managers are directed to regularly announce exchange-traded funds holdings. These investor protection regulations can improve the trust of investors and attract more people to crypto.
- Managed by Professionals: ETFs are professionally managed by professionals. So, the investors can have peace of mind about the security of their holdings.
Will SEC Approve Litecoin ETF?
Hashdex is not the only financial management institution that found the potential of a Bitcoin ETF. Canary Files, another popular asset management firm proposed a Litecoin ETF to the SEC on October 15, 2024.
Although the SEC has approved Bitcoin and Ethereum ETFs so far, the commission is still determining the risk factors associated with other altcoins that have been proposed for ETFs. SEC takes its time to study all the aspects of the cryptocurrency’s security aspects to ensure investor protection. So, it will take time to know the SEC’s decision.
In the case of Canary’s Litecoin ETF proposal, the SEC has till June 2025 to respond. The crypto community has faith in the Trump administration, and the community believes that more altcoin ETFs are underway.
How will the Litecoin ETF Impact Its Price?
ETFs will make it easy for investors in the traditional markets to invest in cryptocurrencies. In the case of a Litecoin ETF, there is a big chance that more investors will come to the market, driving the price up and resulting in significant gains. We are seeing such activities already in light of the potential ETF rumors. Although Litecoin and other altcoin prices have come down due to the bearish sentiments reflected by huge Bitcoin sell-offs in recent days, experts are calculating that this is a short-term setback before a dramatic price surge. So, potentially, the approval of Litecoin ETFs can drive its price up in the crypto market.
The Bottom Line
Crypto ETFs (Exchange Trade Funds) are a novel financial instrument sold in the regular stock exchanges. It is regulated by the SEC, and managed by professionals, which increases investor confidence and protection. Multiple asset management companies are trying to bring on a Litecoin ETF. The community believes that the SEC will approve the same in the near future.
