Bitcoin and most other cryptocurrencies bleed sharply on Wednesday after the U.S. Securities and Exchange Commission (SEC) delayed a decision on a proposed bitcoin exchange-traded fund (ETF), which would have been the first financial product of its kind.
Cryptocurrency markets took and felt the full shock across the board. Bitcoin was down around 6% from 24 hours before, trading at just over $6,300, according to data from CoinDesk.
It has been attempted before by investment firm VanEck who teamed up with Solid X, a financial service company, earlier this year in a bid to launch an ETF that is backed by actual bitcoins rather than futures. To keep it simple, an ETF is a financial product that tracks the price of an asset and is listed on an exchange. The benefit to using this product is that investors don’t actually have to buy the underlying asset to make a profit on the gains of the increase in value. The reason why this is a knock is that ETF’s are seen as a way for institutional investors or hedge funds to invest into cryptocurrency more safely than buying bitcoin on a crypto-asset exchange. Hedge funds typically invest other people’s money and savings from a private client and corporate so their clients will want this mode of investment to add another layer of protection and security.
This is VanEck’s third attempt to push a bitcoin ETF through, after he was rejected by the SEC twice previously. The SEC said that it is pushing out its decision until September 30.
There are several applications underway to get a bitcoin ETF listed, but so far none have been approved by the SEC. Another party to grab the headlines are Winklevoss twins, founders of crypto exchange Gemini, as they apply for a second time to list their ETF after it was recently rejected by the SEC.
To give an overview, combined with past submissions from firms ProShares, Direxion and GraniteShares, 10 bitcoin-related funds are being evaluated by SEC officials, according to public records, although the VanEck/SolidX’s bitcoin ETF is slightly different as it is the only “physical” ETF among all the proposals.
The process is slightly more detailed. Those deadlines are set by the time at which the proposals are published in the U.S. Federal Register, with an initial decision due 45 days after that time and the agency can then further delay those decisions to as many as 240 days following publication in the Register.
The deadline for a decision on two funds from ProShares is August 23rd, is just over two weeks away which could affect the market either way no doubt.
September will see a series of deadlines for bitcoin ETFs, starting on September 15th, the date by which two funds by GraniteShares will receive either the go ahead, a delay or a rejection. The funds were initially proposed on January 5th. The deadline for Direxion’s four funds is September 21st, as indicated by public records, after being first submitted on January 4th.
CoinDesk reported, the SEC stalled its decision on the SolidX-VanEck proposal to September 30th. However, given the way in which the agency considers such proposals, additional time may be carved out, pushing a final decision deadline to as far as late February of next year. Although not a “no” its not a “now” which at a period of massive price decline won’t be viewed positively.
A member of staff from Etoro PR team commented:
“There is something bigger at stake. The lingering question mark for the SEC is around bitcoin custody. To approve the decision, they’d need to do so in the knowledge that the ETF was backed by physical bitcoin – either stored by the Chicago Board of Exchange or a third party… Along with regulatory oversight, this question of custody will determine the next big move in the market.”
SEC Commissioner Hester Peirce believes that it could also invite more mature regulation, both from the private and public sectors. On the latest rejection by the SEC, she expressed to Bitcoin Magazine that the decision is “not a great precedent,” believing that the SEC’s decision misconstrues the commission’s purpose to protect investors as a method to decide what is and isn’t a legitimate investment.
More indecisiveness and indecision, certainly two factors those do not sit well with global investors in a time of heightened anxiety.
It was just Bitcoin that suffered a hammering. The top ten altcoins were firmly in the red, moving downward from 4 to almost 12%. This was the biggest, sharpest drop since reported hacks from major exchanges. At the time of writing mid-evening, IOTA, and Ripple (XRP) showed the most significant losses, dropping 8.52% and 11.46% respectively and XRP finished 16% down at $0.34. Litecoin (LTC) wasn’t much better with a loss of 8.5% on the day and EOS went near to $5.
Among the top twenty coins by market capitalization, Ethereum Classic (ETC) has been hit the hardest, losing over 14% and trading at $15.18 at 10/08/18. Aug. 8, British crypto exchange Coinbase added support for ETC on its Coinbase Pro platform. , commission-free crypto trading platform Robinhood listed ETC as well.
Total market capitalization of all cryptocurrencies is at $236.7 billion, down almost $15 billion since the SEC announcement. It could be a perfect chance to implement one of Warren Buffet’s mantras of “be fearful when others are greedy and be greedy when others are fearful.”