The recent surge in price of Bitcoin that saw it reached a two month high has been attributed to the fact that many institutional investors believe that Bitcoin ETF could be approved before the end of this year and especially by next month.
An independent research,carried out by a Bitcoin enthusiast , Tom Alford who is an independent cryptocurrency trader and investor had shown that Bitcoin ETF has unique similarities to gold ETF. Since, Charlie Lee, the founder of Litecoin had likened Bitcoin to gold recently, his findings could be true.
Tom Alford said that after gold ETF came into existence in 2003, that by 2011 which is an 8 years gap, its price had increased to about 500% yearly after it was traded previously for 30 years.
Just this week, the Winklevoss twins application for Bitcoin ETF was rejected by SEC, in a vote of 3:1, citing reasons of protecting investors, manipulation and fraud for factors behind the unsuccessful application.
However, many believe that the proposal sent in to SEC by CBOE Global Market that will be decided by August 16, 2018 will be successful.
Tom Alford’s position is based on the change in perception about bitcoin, it’s use and pricing as well as a striking resemblance between gold ETF and Bitcoin ETF. In a statement he said,
“A SEC approved fund provides huge credibility for safe investment, in a market where both fund managers and wealthy individuals are reluctant to invest due to safety concern.”
Alford argues that high net-worth individuals want to invest, but presently face barriers to entry –
“29% of millionaire’s have expressed a high interest in cryptocurrency investment, with a further 27% expressing a general interest in digital assets. Financial giants such as JP Morgan (with trillions in client funds) acknowledge the fact that their clients want to invest in cryptocurrency.”
“The only thing missing is a safe method of doing so, which an SEC approved ETF would provide. We’re seeing Bitcoin price predictions of up to $50k by the end of 2018 – I believe ETF approval is the only catalyst that could vindicate this price and make it a reality.”
Since, it is expected that ETF will be a tool that will attract more institutional investors into the Bitcoin market.
The high flying reputation of cryptocurrency was shot down on July 26th, as the stock exchange commission in the United States rejected the prospect of the coin been on the Exchange Traded Funds (ETF), but a pro-bitcoin official stood firmly against the agency’s directive.
SEC REJECTS BITCOIN
The United States exchange commission explained why it rejected the digital currency, in a 92 pages publication. The exchange commission said that it backed out of a change of rule, at the behest of Bats BZX exchange.
The alteration to the rule, the agency said they would have given Bitcoin the chance to tether investment products. The same thing happened to BATS last year when the regulatory agency rejected its product in the exchange market. BAT came back stronger, petitioned the agency, amid public commentary with the hope of a change in the stance of the commission.
SEC stated in its statement, saying explicitly that, it’s not holding any form of animosity against Bitcoin or any other form of cryptocurrency, but it was more concerned about its proposal that was sent to the commission by its sponsors.
The Commission emphasizes that its approval does not rest on an evaluation of whether Bitcoin or blockchain more generally has utility or as an innovation or an investment, the agency stated.
SEC is not bending its stance “because as discussed in details below, BZX has not met its burden, under the exchange act and the commission rule of practice, to demonstrate its proposal is consistent with the requirements of the Exchange Act section 6(b) (5), in particular, the requirements that its rules be designed to prevent fraudulent and manipulative acts by practices.”
The exchange-traded fund is an invested fun traded in the stock exchange, much like stocks. ETP holds assets, such as stocks, commodities, or bonds. Exchange funds can be listed on boards such as the New York stock exchange, just, commodity stock.
The commission clarified further that,
“existing or newly created Bitcoins future market may achieve significant size, and an ETF exchange may be able to demonstrate in a proposed rule change that it will be able to address the risk of fraud and manipulation by sharing surveillance information with a regulated market of a significant size related to Bitcoin, as well as where appropriate, with the spot markets underlying relevant Bitcoin derivatives,” it stated.
But a high ranking officer at the commission, Commissioner Hester M. Pierce tolled a different path; she said “by precluding approval of cryptocurrencies based ETF’S for the foreseeable future, the commission is engaging in merit regulation. “Bitcoin is a new phenomenon, and its a long-term viability is uncertain.
It may succeed, it may fail. The commission is, however, not well positioned to assess the likelihood of either outcome, for Bitcoin or any other asset. Many investors have expressed an interest in gaining exposure to Bitcoin, and a subset of these investors would prefer to gain exposure without owning Bitcoin, directly.”
She argued further that such exposure would allow the customer to buy the coins in a regulated market, thereby giving the product the required security, it needs to survive.