Yesterday the SCE rejected the second application for a Bats BZX Exchange “Winkelvoss Bitcoin Trust”. The decision cites insufficient protection for investors from fraud and manipulation. This is the second time the fund gets rejected; the first cited lack of diversification in custody. Yesterday rejection had far bigger implications for the crypto market however, in that the CBOE ETF is also in process. And this rejection will most certainly indicate that the CBOE fund will also be denied. So the impending question in everyone’s mind is if the Bitcoin ETF is dead, is the SCE right, and what comes next?
Dead on Arrival
The twins’ ETF rejection had an immediate impact on prices, causing Bitcoin to drop by over $400 within hours. This is an example of how susceptible the market is to news in general. When the CBOE announced the application for an ETF earlier this month, expectation of a boom in the market increased dramatically. It propelled the market from the mid 6,000s to just above $8,000. However, this ruling makes the approval of a CBOE ETF highly unlikely. Mostly because the same conditions will exist when the CBOE ETF gets reviewed. And a similar ruling on the CBOE ETF would be catastrophic for the market as it will kill all and any momentum the market gained since the CBOE’s announcement.
Not Ready Yet
In hindsight the SEC’s decision to deny one and all ETFs is correct. The market is not yet stable or secure to bring people’s lives savings into the market. Despite offering strengthened custody and insurance on their ETF, the CBOE still has no answer to manipulation and volatility. As is, Bitcoin is not stable; and no exchange or fund has a way to stop price manipulation or volatility. And if Bitcoin is marketed as reserve of value (digital gold), there’s no stable coin in existance that can take its place.
The crypto market needs more time to evolve and exchanges need to learn from each SEC’s rejection. There is mounting pressure from investors and international competitors to launch a crypto ETF. And there are a growing number of funds already offering bundled crypto securities outside SEC’s guidance. However, for the SEC to approve an ETF without realistically confronting Bitcoins’ stability is not only irresponsible but unethical. And the global financial consequences are far too dire to ignore. For the moment, crypto will continue as it always has, expanding and contracting; looking for a path to adaptation.
A Bitcoin ETF would mean an exponential growth in institutional investment. Therefore, an expected approval in August would could easily drive Bitcoin to $50,000 or more. In addition to the CBOE ETF, there are at least five other ETFs in the pipeline, and the list of Bitcoin funds have grown from 250 to 300. Therefore, it is safe to say that a Bitcoin ETF is by no means dead, just delayed. A Bitcoin ETF offers too many financial opportunities to all industries and markets, all too impossible for the government to ignore.