Every single Bitcoin (BTC) exchange-traded fund (ETF) proposal in the United States has been either rejected by the Securities and Exchange Commission (SEC) or delayed into oblivion. Most notably, the VanEck SolidX Bitcoin ETF, which was to be backed by actual Bitcoins (BTC) got the cold shoulder from the SEC.

Now Reality Shares has proposed the Blockforce Global Currency Strategy ETF to the SEC, and it is being praised by some crypto enthusiasts for having a real shot at getting accepted. However, this ETF may not be a good thing due its use of CME and CBoE Bitcoin futures instead of actual Bitcoins (BTC), and the fact that this ETF is mostly comprised of fiat currencies.

This ETF attacks Bitcoin on two fronts, first by backing it with fiat currency and also because of the fact that none of the invested money is actual Bitcoin.

The Reality Shares Blockforce Global Currency Strategy ETF would be comprised of 15 percent U.S. Dollars (USD), 15 percent Great Britain Pounds (GBP), 15 percent Euros (EUR), 15 percent Japanese Yen (JPY), 15 percent Swiss Francs (CHF), 10 percent money market mutual funds, and 15 percent CME and CBoE Bitcoin futures.

The idea is that the SEC will be more open to approving an ETF that is mostly classical investments like global currencies and bonds, with only 15 percent being Bitcoin futures, versus a purely Bitcoin (BTC) ETF.

There are at least a couple of reasons why this new ETF would be a bad thing for the Bitcoin (BTC) market if it is approved.

First off, Bitcoin futures on CME and CBoE are backed by cash and involve no actual Bitcoins (BTC), making these futures equivalent to paper Bitcoins. These paper Bitcoins from the futures markets increase the effective Bitcoin supply, which can lower the price of Bitcoin (BTC) long term. Further, investors choosing Bitcoin futures on CME and CBoE versus buying actual Bitcoins (BTC) diverts demand away from the spot market. Worst of all, CME Bitcoin futures have generally been generating strong short selling pressure since the day they launched on Dec. 17, 2017, the same day Bitcoin (BTC) began to crash and entered the bear market.

It would not be good to pump even more money into the toxic CME Bitcoin futures via this new Bitcoin ETF.

Another reason this Bitcoin ETF would be a bad thing is it may be branded as the first Bitcoin ETF, when in reality none of the money invested into this ETF would be used to buy actual Bitcoins (BTC). Three fourths of money invested would go into the fiat currency market, 10 percent would go into the bond market via money market mutual funds, and 15 percent would go into paper Bitcoins on CME and CBoE.

Therefore, an investor who buys the Reality Shares Blockforce Global Currency Strategy ETF under the impression that they are diversifying into Bitcoin (BTC) would actually not be investing in Bitcoin (BTC) at all. This ETF has the potential to divert significant amounts of demand away from the Bitcoin (BTC) spot market if it is approved, especially due to the hype that it is the first Bitcoin ETF, even though it is not a Bitcoin ETF at all.

Bitcoin enthusiasts, traders, investors, and speculators must be aware of the specific details of any Bitcoin ETF before choosing to advocate for it or invest in it. An ETF backed by actual Bitcoins (BTC) would be a good thing, since it would facilitate an influx of capital from institutional investors and stock traders into the Bitcoin (BTC) spot market. However, ETFs that are based on cash-backed Bitcoin futures have the opposite effect and actually weaken the Bitcoin (BTC) spot market by diverting demand away from it.