Once again about ETF and SEC

1 Year ago / Articles / Stay updated

Once again about ETF and SEC


The miracle expected by bulls did not happen: the US Securities and Exchange Commission (SEC) rejected several applications for the registration of traded bitcoin ETF funds. "In the span" were the company ProShares, Direxion and GraniteShares.


What is ETF and why is there so much noise around this investment tool? ETF is a tradable index fund based on bitcoin. The introduction of this tool on cryptocurrency market is a significant step in the evolution of digital currencies to a legitimate asset class. The essence of the process is quite simple: the company that owns the bitcoins registers the ETF fund and offers market participants to buy shares of the portfolio that tracks the profitability of a certain asset (in our case - bitcoin). The expected income is possible both for long-term investments and for day trading.

An important role here is played by the competence of fund managers, their ability to keep the ETF balance at the market level and ensure the safety of asset storage. Only in the US, the volume of the ETF market is estimated at $ 3 trillion.


The prospects of ETF drew the attention of the brothers Tyler and Cameron Winklewoss, they were among the first to try to register the bit-tied exchange investment fund BATS Global Exchange (BZX), however, like others, received a refusal from the SEC.

How does the prospect of introducing ETF scare the SEC and at the same time inspire the participants of cryptocurrency market? In their official conclusions accompanying the refusals, the Securities and Exchange Commission refers to the lack of regulation of cryptocurrency market, the high risk of manipulation, as well as a number of rules of the Commission's work, which many companies are not yet able to observe (for example, providing reliable measures to protect against fraud) .

Crypto enthusiasts, in turn, are confident that the emergence of bitcoin index funds will attract traditional investors to the crypto assets of large investors, which will undoubtedly unfold the market to a positive trend and lead to a rapid rise in the cost of the flagship crypt, and beyond it of other altcoins.


It is likely that the SEC is eyeing the companies, and eventually the endorsement on the ETF will be obtained by someone who fully agrees to the Commission's regulatory mechanisms, including providing user data and monitoring excluding market manipulation.

Such chances are at the Chicago Board Options Exchange (СВОЕ), also filed with the SEC application for ETF - now its consideration is postponed until September 30. But even in the case of the giant, СВОЕ has to wait for the appearance of the first stock of bitcoins in the current year is too optimistic. "One of the important problems with the implementation of ETF - the definition of an adequate level of liquidity of the asset,"  says CBOE's own operating director, Chris Conkannon, "has not been done before."


The likelihood that on September 30, the SEC will suddenly approve the decision proposed by СВОЕ, tends to the area of ​​negative numbers. Despite the fact that a significant share of the market is well aware of this, this news can negatively affect the course of bitcoin, as it was with the refusal of the brothers Winklewoss (then on this news bitcoin broke from the eight thousand bar down). If a miracle, so expected by bulls, happens, we have a chance to witness a historic breakthrough in cryptocurrency economics, multi-billion influences and the rapid growth of viola and bitcoin.