Bitcoin ETFs: Latest Developments in the Regulatory Context

Just when the Bitcoin price rally in the last two weeks was expected to bring some optimism back in the market, the market correction in the last two days has caused the world’s largest cryptocurrency to lose nearly 5%. Currently, at the press time, Bitcoin is seen trading at $7602 with a market cap of $130 billion, according to the data on CoinMarketCap.

Earlier this month around the 15th of July, when Bitcoin was trading at a nervous breakdown level of $6000, the bulls took charge and, in a week’s time, it shot by more than 25% to trade close to $8000, later finally crossing this crucial resistance. There were several factors behind this up-move like the pumping of the institutional money in the cryptocurrency space, the positivity surrounding the arrival of Bitcoin ETF, South Korea’s regulatory watchdog forming a new organizational body to drive innovation in the crypto financial sectors, besides other things.

However, one of the key reasons has been the arrival of Bitcoin ETF which has created a lot of hope among retail and institutional players. Some players have doubled-down on their predictions for this much-awaited investment product, while some remain skeptical considering the SEC’s critical stand over digital currencies.

Last week, the news of the rejection of the Bitcoin ETF proposal from the Winklevoss twins was enough to break Bitcoin’s northward journey pulling it back below $8000. Later as things got clear, that this rejection was mistaken for the CBOE Bitcoin ETF proposal, things resumed to normalcy and Bitcoin pulled back the lost grounds. Although, the SEC has clarified that it has kept it gates open for future Bitcoin ETF proposals.

Following this, there have been some latest developments around Bitcoin, Bitcoin ETF, and the SEC.

Trader Brian Kelly Remains Bullish on Bitcoin

In his recent interview on CNBC’s Fast Money, trader Brian Kelly expressed optimism on the price of Bitcoin and said that the latest correct is only temporary. Kelly said:

“[Bitcoin has] had a pretty good run from $5,800 up to $8,300, $8,400 or so. So while it might seem crazy to the legacy markets and the bitcoin world, this is just a normal correction.” He further added: “I think this is a good environment. I think the holdup is structural within the ecosystem. It’s just not quite ready for prime time yet.”

Although Kelly remains positive on the arrival of Bitcoin ETF, he thinks there are still two major hurdles in the path before that becomes a reality. The first he said is a need for a regulated cryptocurrency exchange that would instill confidence among institutional players willing to join the crypto frenzy. He said:

“We’ve seen multiple companies like Fidelity, like BlackRock looking into it. There’s definitely more of a buzz of more money coming into this sector.”

The second reason that Kelly mentioned was that the Bitcoin ETF would require institutional quality custody to reassure its legitimacy on a broader scale. Kelly says that he doesn’t think the Bitcoin ETF will come anytime before the fourth quarter of 2018 stating:

“We’re in an environment where there’s less regulation and this is the best opportunity to get something new through.”

BitMEX’ Arthur Hayes Expects Bitcoin to Cross $50K on Arrival of Bitcoin ETF

During a recent interview, while answering his outlook on crypto-backed ETFs, BitMEX CEO Arthur Hayes said there’s a “50/50 chance that we see some decision in Q3, and again we have another two ETFs looking for approval in February of next year.”

Hayes, however, was not much willing to comment on the CBOE Bitcoin ETF by VanEck and SolidX’s, but commenting on a broader sense, he said:

“I think at the end of the day that the SEC wants to keep people interested in the financial markets and if retail continues to ask for these particular products (ETFs), at some point they are going to have to approve one of them.”

SEC Chief had a ‘Heated’ Debate on Crypto Last Month

On Tuesday, July 31, the SEC released a transcript of a roundtable discussion on the conduct standards of investment professionals. Several SEC officials including chairman Jay Clayton were present in the discussion. One of the SEC officials, Eric Werner, said that the discussion often turned into a passionate one at times and also citing some ‘heated’ arguments between Clayton and an unnamed attorney. Werner was quoted saying:

“In fact, the first time that I met the Chairman, I walked into a heated discussion he was having with an attorney in my office about the legitimacy and viability of cryptocurrencies. I was taken aback, honestly, about how much thought he had given to this space and the issues surrounding that. And what I have learned in the time working with him is that he has given every single issue that he has confronted that same dedication and thought process.”

The SEC has long been questioned about its stand on ICOs to which Clayton said:

“I want to go back to separating ICOs and cryptocurrencies. ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story.”

SEC Commissioner Clarifies Her Vote is Not For/Against Bitcoin

After the news of SEC rejecting the Winklevoss Bitcoin ETF hit the market, there was some sort of skepticism among investors. SEC Commissioner Hester Peirce, while taking her stand said that decision is unfair while stating that the agency should not act as a gatekeeper for new emerging technologies like Bitcoin.

While taking to CoinDesk, Peirce said:

“From my perspective, we need to be mindful of what our role is, and it’s not to be the ones who decide which innovations and which technologies get through and which ones don’t. I think that’s a very dangerous position to put ourselves in, and I think it really does harm investors because it denies them opportunity.”

However, Peirce comments were received as an endorsement to the cryptocurrency after which she clarified that her comments were instead in the defense of the new technology, the people who have heavily invested their efforts in developing it. Peirce commented:

“I’m not taking a view whether bitcoin is going to succeed or fail. I’m excited by the fact that people are thinking of new ways to do things. Bitcoin is one of those things, blockchain is one of those things, other cryptocurrencies – but again I’m not weighing on any particular innovation or any particular asset.”

She further added:

“If someone is trying to raise money for a legitimate project, as long as the person explains what he’s trying to do and what he’s going to do with the money that reveals everything material that investors need to know – I don’t think we should stand in the way.”