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Bitcoin ETF damned by the SEC

The SEC has finally decided against the proposed rule change that would have allowed the Winklevoss ETF to be listed and traded on the BATS exchange.

btcusd-20170310

The chart shows an early spike on misinterpreted news setting a new all-time high and demonstrating the fear of some bitcoin traders to miss the wave, and later the crash after the real decision.

Currently the price is almost back at $1200, which seems to be rather astonishing given the harsh words the SEC had for the proposal.

Specifically the SEC argued that the rule change would “allow fraudulent and manipulative acts and practices and would not protect investors and the public interest”.

It nailed two things that would have to be, but are not, met by the proposal. It also described quite many critical points they learned about in its comment period, but insisted that in the end it came down to these two items:

  • The listing exchange must have surveillance-sharing agreements with significant markets that trade bitcoin or derivates of it.

  • Those markets must be regulated.

Given the globally distributed and unregulated nature of bitcoin, satisfying these demands seems to be almost impossible.

On the other hand, the SEC left the door open for a future bitcoin ETF, provided that the above two requirements are fulfilled. By the way, they call it ETP with the P standing for product, seemingly to make clear that bitcoin is a commodity in their book.

Over all, this decision means that a governmental institution associates bitcoin with fraud and manipulation and that it has to be held away from investors.

That doesn’t sound as if bitcoin could become a new currency or asset class with “real value” any time soon.

All the more interesting is the relative stability of bitcoin after this shock. I would have expected BTC to retreat more severely and then come back over time. Currently it looks much better, as it is — for now — almost back where it started the day.

The current violent drop has been caused by fast acting traders. Shorting bitcoin is possible on many smaller “cryptocurrency exchanges”, mostly unregulated web sites running an exchange app. The drop has probably been mitigated then by trend traders who want to buy the dip.

Perhaps bitcoin has also been supported by “long-term proponents” to make the crash look not too ugly and give the SEC even more reasons to believe bitcoin is only hot air sold for an exorbitant price. Or the down move simply went out of steam after the short traders were done and everyone else wanted to wait for a longer term indication.

Let’s see, during the next weeks, where slower investors will bring the price. The itself so-calling “smart money” may give us a clue whether bitcoin is still seen as something that has potential for an investor:

  • If the price goes severely down, bitcoin may have its best days behind it.

  • If it goes up despite the SEC decision and makes new highs, the sky is the limit. In that case bitcoin would have demonstrated that it may already be too accepted by a very diverse global community to get killed by one government.

Trading bitcoin can still be done without the ETF, most conveniently with the help of CFDs.

And it may still have a bright future. One that could serve the well systemized Zen trader, who is able to switch to investor-mode after getting in safely.


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