SEC Rules against Winklevoss Twins Bitcoin ETF
The digital currency community hotly anticipated a ruling from the Security Exchange Commission on the Bitcoin ETF. For a seeming majority, it wasn’t the news that investors were hoping for. The agency cited concerns over fraudulent and manipulative pricing as some of the reasons for the rejection. Specifically citing that the proposal was at odds with the requirement that
“…the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public…” – SEC, March 28, 2017
Price Plunges on Bitcoin ETF Rejection
Bitcoin prices dropped nearly 35% on the day of the SEC’s rejection of the Bitcoin ETF. The price of 1 Bitcoin went from $1325 USD to under $1000 USD. Many argued that a Bitcoin ETF approval would bring a surge in Bitcoin prices. While others argued that an approval would be bad for Bitcoin’s adoption in the long run, causing it to become a bigger target for hackers.
Good news, the price has since recovered in the months following, and Bitcoin prices are set to break new records. The price shortly after the ETF disapproval event was $1281.90 US Dollar per 1 Bitcoin. It has since surged sharply to over $1,700 per BTC in the following weeks.
What Could an Approval of the Bitcoin ETF Do?
An approval would have significantly increased the liquidity of Bitcoin by causing a surge of traders to flood markets with buy orders. This would be predicted by the price of Bitcoin rising leading up to the announcement of theBitcoin ETF filing status. Although it dropped when the denial was announced, pricing stabilized days later. Bitcoin prices are currently close to the historic highs before the announcement of the SEC’s decision.
This may not spell the end for a BTC ETF
Other companies also have put proposals for cryptocurrency ETFs at the SEC. One proposal introduces the idea of having insurance on the digital assets underlying the fund. Implementing the correct measures could make the agency more likely to grant approval in the future. However as of today, the decision suggests the SEC continues to remains deeply skeptical of bitcoin. Insuring a new asset without physical proof is proving to be difficult and they are not commonly understood as of today.
All is not lost on the Winkelvoss ETF just yet, as the BATS Global Markets, a global stock market exchange based in the US, plans to appeal the March 11 decision of the Securities Exchange Commission.There odds of the ETF being approved were roughly thirty percent by estimates. This event had a potential very significant upside if approved. Seeking Alpha breaks down the Asymmetric-risk-reward of laying a bet on the approval news.
The Public is Getting Optimistic about Bitcoin
While cryptocurrencies like Bitcoin have recently generated more mainstream attention, it still has a difficult time shaking off the outlaw reputation inherently attached to it. The controversy stems from its use in the underworld and several high-profile thefts that have occurred. After all, the debate isn’t over yet. Coindesk recently reported that a judge will review the Bitcoin ETF Rejection.