Bitcoin prices remained relatively stable this week, avoiding significant losses after the U.S. Securities and Exchange Commission (SEC) rejected nine separate proposals for exchange-traded funds (ETFs).
The SEC released three orders on August 22, shooting down the proposed funds and explaining its reasoning. Every order provided the same logic, stating that:
“The Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
Bitcoin markets reacted little to this news, with the digital currency’s price suffering modest losses, according to CoinDesk.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
SEC Ruling Already Baked In, Say Analysts
These losses were relatively insignificant because the market had already factored the SEC’s decision into prices, said market observers.
“After the most recent Winklevoss rejection, virtually no one expected any of these applications to be approved,” said Tim Enneking, managing director of Crypto Asset Management.
Oliver Isaacs, blockchain investor, advisor & influencer, offered a similar take on the matter.
“I think the ETF rejections were expected and therefore already factored into the price of Bitcoin.”
Joe DiPasquale, CEO of cryptocurrency fund of hedge funds BitBull Capital, provided a slightly different point of view, emphasizing that:
“The ETFs in question were never as high profile as the Winklevoss ETF applications were, so we did not see the markets react on the same scale.”
Market Resilience: ‘FUD-Fatigue’
DiPasquale elaborated on the market’s reaction, stating that traders are becoming less sensitive to negative news.
“We are also witnessing what I refer to as FUD-fatigue. We have seen recurring events, such as regulatory concerns in Asia, have a diminishing impact the more often the markets face them. The same principle applies to the repeated rejection of Bitcoin ETFs.”
Going forward, Bitcoin’s best hope of getting an ETF approved is the proposed VanEck SolidX fund, stated analysts. This financial instrument was designed more for institutional investors, as individual shares will each be worth 25 Bitcoin.
Eric Ervin, CEO of Blockforce Capital, weighed in on this proposed fund.
“In the short run, we feel the best hope for a Bitcoin ETF this year would be the VanEck SolidX proposed ETF which will take custody of the Bitcoin rather than invest in the futures markets. It has a couple of other features which make it slightly more palatable for the SEC, 1.) Insurance, and 2.) a very high share price, prohibiting the average “retail” investor from participating.”
Whether this particular fund receives approval or not, the entire blockchain industry is moving forward, claimed Ervin.
“Regardless of an ETF gaining approval, the crypto and blockchain markets are robust enough to grow organically as more and more companies enter the space to build the onramps for investors and institutions to gain access,” he stated.
“We are already seeing companies like Coinbase, Nomura, Fidelity, and several others working to deliver institutional custody solutions. It is really just a matter of time before this technology crosses the gap between niche market adoption to mass market adoption.”
Disclosure: I own some Bitcoin, Bitcoin Cash and Ether.