All Eyes on the SEC As Bitcoin ETF Decision Season Looms
All eyes are on the SEC as bitcoin ETF decision season looms. With four decisions to make over the next five weeks, the U.S. Securities and Exchange Commission could heavily influence sentiment in crypto markets for the rest of the year. Is a positive bitcoin ETF decision imminent?
Subscribe to the Bitsonline YouTube channel for great videos featuring industry insiders & experts
After the VanEck Bitcoin ETF Decision Delay, the SEC Has a Big Month Ahead
Vitalik Buterin thinks the crypto community should be more focused on addressing the obstacles cryptocurrencies currently face when it comes to everyday use.
I think there’s too much emphasis on BTC/ETH/whatever ETFs, and not enough emphasis on making it easier for people to buy $5 to $100 in cryptocurrency via cards at corner stores. The former is better for pumping price, but the latter is much better for actual adoption.
— Vitalik Non-giver of Ether (@VitalikButerin) July 29, 2018
Influential writer and bitcoin enthusiast Andreas Antonopoulos thinks bitcoin ETFs will bring potential harm to the ecosystem, calling them a “terrible idea”.
Whatever the pros and cons, the SEC’s preparedness to approve or disapprove of bitcoin ETF proposals has a substantial impact on the market. Many argue the sharp downward movement of crypto prices in mid-August was at least partially a result of the regulator’s decision to delay it’s decision on the CBOE VanEck SolidX ETF proposal for 45 days.
The VanEck delay followed the agency’s second — and likely final — denial of the Bats BZX Winklevoss Bitcoin Trust ETF application. While not unanimous, the Winklevii rejection cited the potential for market manipulation and fraud as grounds for the decision.
The market has clearly indicated that a bitcoin ETF would bring capital and legal validity at least to bitcoin, with a positive sentiment flow-on into the wider cryptocurrency space. With this in mind, we look ahead to the application calendar for the next month-and-a-bit.
August 23rd — ProShares
The ProShares ETF application is set for final approval or denial on August 23rd. ProShares is a seasoned ETF manager, with over $30 billion USD in assets, allocated across a large suite of ETF products in equities, commodities, bonds, and currencies.
A number of BitMEX pundits are clearly predicting the ProShares application will be denied.
Shorts are simply hoping to get an ETF denial to give them the liquidity to get out of their positions. It’s a smart plan (if we don’t squeeze first). However, that means ETF denial may not see a large decline, but simply large volume as shorts have to buy to cover
— Crypto Quantamental (@CryptoQF) August 21, 2018
September 7th — Bitwise
September 7th will be the SEC’s first deliberation over the Bitwise Asset Management exchange-traded index fund application. The body can choose to deny the application or delay their decision. Bitwise currently operates the HOLD 10 Index Fund privately. The fund provides accredited investors diversified exposure to the market. They have four indexes, the Bitwise 10 Large Cap, 20 Mid Cap, 70 Small Cap, and 100 Total Cap.
The San Francisco-based firm applied to the Securities and Exchange Commission to list the fund publicly at the end of July. Their application is unlikely to get the nod. The fund’s baskets hold coins with looming questions over their status as regulatable securities. However, the company’s global head of research, Matt Hougan, is confident of eventually being approved:
“The market is professionalizing in a direction that the SEC would allow a crypto ETF onto the market.”
September 21st — Direxion
Direxion is over twenty years old and holds in excess of $14 billion worth of assets in its non-traditional, index-based, leveraged and inverse ETFs and mutual funds. On January 4th, NYSE Arca, Inc. applied to the SEC to list five leveraged Direxion bitcoin funds. The application was withdrawn and then resubmitted for consideration. In April, the regulator delayed the approval decision for 180 days (which would have taken it to the end of July), with the right to further delay it for a further 60 days. 240 days falls on September 21st.
The proposed funds are bear and bull funds with different degrees of leverage. With a final decision set for one month from now, the leveraged nature of the funds is likely to weigh against their approval prior to more traditional ETF structures.
September 30th — VanEck SolidX
Delayed on August 7th, as outlined in a published notification with a title that leaves little to the imagination — Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change to List and Trade Shares of SolidX Bitcoin Shares Issued by the VanEck SolidX Bitcoin Trust — the CBOE BZX Exchange, Inc. proposed rule change, which would allow it to list the VanEck ETFs, is widely considered the most likely to be approved first. At the end of September it can be rejected, approved, or delayed again.
The joint application proposes indexing the fund to a number of bitcoin trading desks, helping allay SEC concerns of price manipulation at the spot market level. And with a proposed listing price of roughly $200,000 per share, the proposal would appear to address any concerns the SEC has over retail investors being burned. (Having said that, of course, a reverse split in the future could easily usher in less sophisticated investors by lowering the price.)
Keep Your Eyes Peeled and Your Seatbelts Buckled… We’re in for a Bumpy Ride
If all these applications are declined, price uncertainty could sully the crypto market for the remainder of 2018. If even one is approved, the SEC will have given the institutional investor class the keys to a vehicle that will irreversibly change the crypto landscape. Whichever way the SEC falls over the next five weeks, publicly traded cryptocurrency funds are unlikely to be thwarted forever. A positive bitcoin ETF decision will eventually be made.
The Winklevii may be on the nose. But one suspects the sophisticated insurance, anti-fraud, anti-manipulation, and anti-small guy mechanisms in place in the VanEck SolidX proposal may be sufficient to win the regulator over. And even if they aren’t, the commissioners are entirely privy to the widespread sense of anticipation over bitcoin ETFs, and the need for them to choose the right one first.
Have your say. Do you expect to see an SEC-approved bitcoin or crypto ETF within the next five weeks? Do you think there will eventually be a positive bitcoin ETF decision? Which product do you think is most likely to gain approval first?
Images via Pixabay