Bitcoin ETF (Exchange-Traded Fund) supporters felt anguish after another round of rejection by The United States Securities and Exchange Commission (SEC) towards nine bitcoin ETF applications from ProShares, Direxion, and GraniteShares on August 22; only a few days after the SEC’s disapproval of the Winklevoss ETF in July. Issued in a trio of orders, the commission stated a precisely identical reason behind all of the declines: There is a concern on fraud and price manipulation in the bitcoin markets. “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.”
SEC expressed the same fear on Winklevoss’ petition after the twins, Cameron and Tyler, failed to prove that crypto markets are resistant to manipulation. Market manipulation is indeed a debatable topic in the cryptocurrency world. According to Business Insider, cryptocurrency is very vulnerable to market manipulation because it is massively unregulated and controlled adequately by the sentiment. This issue becomes a top concern and even encourages The United States Justice Department to open a criminal probe into cryptocurrency market manipulation .
The Attempt is Not Over Yet
The endeavor to establish bitcoin as an ETF investment has started since 2013, also by the Winklevoss twins; which was eventually rejected by the SEC on March 10, 2017 because of regulatory concerns. However, the twins didn’t give up and reapply a proposed rule change on June 2018. Unfortunately, this second attempt was rejected again on July 26, 2018.
At the time of writing, there are still two active cryptocurrency-based ETF applications awaiting for a decision; Bitwise with its ETF that would track a basket of cryptocurrencies and a joint application from VanEck and SolidX with its bitcoin ETF. Both of the applications were filed in July 2018.
CNBC Africa’s cryptotrader host and Onchain Capital founder Ran Neu-Ner, showed his optimism towards bitcoin ETF, primarily related to the application by VanEck and SolidX on a tweet posted on July 11, 2018, saying: “It’s inevitable that a BTC ETF will be approved soon and I suspect that this one may have a chance. An ETF would be a huge catalyst for the market. August 10th it is…”.
It’s inevitable that a BTC ETF will be approved soon and I suspect that this one may have a chance. An ETF would be a huge catalyst for the market. August 10th it is...https://t.co/JqBg6uGMcG— Ran NeuNer (@cryptomanran) July 11, 2018
Furthermore, DataDash Youtube channel’s influencer Nicholas Merten explained why a bitcoin ETF matters. “Here’s why a bitcoin ETF matters: With the release of an ETF, this allows investors to add bitcoin to their retirement portfolio. Global Pensions Market: $41.3T. If bitcoin captures just 1% of global pensions, that would create $413,000,000,000 of exposure for cryptocurrencies.”
Here’s why a bitcoin ETF matters:— Nicholas Merten (@Nicholas_Merten) July 24, 2018
With the release of an ETF, this allows investors to add bitcoin to their retirement portfolio.
Global Pensions Market: $41.3T
If bitcoin captures just 1% of global pensions, that would create $413,000,000,000 of exposure for cryptocurrencies.
In addition, Investopedia describes that there are a couple of benefits of blockchain ETF:
Pooled investments in baskets of stocks of a mutual fund
Real-time trading with tick-by-tick price changes of a stock
Can be actively or passively managed
Cover companies with international exposure
Track the performance of blockchain-based indexes specially designed to serve as benchmarks for the ETFs
The sentiments against ‘bitcoin ETF’ are dominated by green marks, indicating that not only the experts, but cryptocurrency enthusiasts in general are also optimistically hopeful about the future of bitcoin ETF.
Figure 1: Sentiment Towards ‘bitcoin ETF’ Keyword
Data Source: Sentiment Viz
Nonetheless, there are always pros and cons in everything. The CEO and Co-founder BnkToTheFuture platform, Simon Dixon, thinks bitcoin ETF is a bad idea, stating that the frenzy of purchasing cheap bitcoins would have driven bitcoin price spike uncontrollably as a result an even more scarce asset. The market would be even less stable and would be a target of manipulation by instructional money.
Vitalik Buterin, the Co-Founder of Ethereum dissents as well. “I think there’s too much emphasis on BTC/ETH/whatever ETFs, and not enough emphasis on making it easier for people to buy $5 to $100 in cryptocurrency via cards at corner stores. The former is better for pumping price, but the latter is much better for actual adoption.”
How Did The Rejections Affect The Market?
A few minutes after the refusal of Winklevoss first attempt, the price of bitcoin fell 15% or nearly 30% from the all-time high to $1,022.68 at 21:00 UTC.
Figure 2: Bitcoin Price After The First Winklevoss Attempt Refusal, 10 March 2017–11 March 2017.
Data Source: Coindesk
A similar scenario could be seen a few moments after the rejection of Winklevoss second application. Bitcoin price slided below $8,000, touching $7,855.14 on July 26, 2018 before plunging even further to $7,798.70 on July 27, 2018.
Figure 3: Bitcoin Price After The Second Winklevoss Attempt Rejection, 26 July 2018–27 July 2018.
Data Source: Coindesk
Bitcoin price declined again after the third disapproval of bitcoin ETF filed by ProShares, Direxion, and GraniteShares. Although bitcoin price increased quite well in the beginning of the day, a few hours after the decision, the price bounced back from approximately $6,800 to around $6,300 and even $6,200.
Figure 4: Bitcoin Price After The Latest Bitcoin ETF Rejection, 22 August 2018–23 August 2018.
Data Source: Coindesk
Cryptocurrency enthusiasts still wait for the decision of the cryptocurrency/bitcoin ETF application by Bitwise and VanEck — SolidX, which hopefully will be approved by SEC. Cryptocurrency/bitcoin ETF is believed to bring a brighter future for cryptocurrency world.
 Securities and Exchange Commission, Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Order Disapproving a Proposed Rule Change to List and Trade the Shares of the GraniteShares Bitcoin ETF and the GraniteShares Short Bitcoin ETF (Release №34–83913; File No. SR-CboeBZX-2018–001, 2018).
 Securities and Exchange Commission, Self-Regulatory Organizations; NYSE Arca, Inc.; Order Disapproving a Proposed Rule Change Relating to Listing and Trading of the Direxion Daily Bitcoin Bear 1X Shares, Direxion Daily Bitcoin 1.25X Bull Shares, Direxion Daily Bitcoin 1.5X Bull Shares, Direxion Daily Bitcoin 2X Bull Shares, and Direxion Daily Bitcoin 2X Bear Shares Under NYSE Arca Rule 8.200-E (Release №34–83912; File No. SR-NYSEArca-2018–02, 2018).
 Securities and Exchange Commission, Self-Regulatory Organizations; NYSE Arca, Inc.; Order Disapproving a Proposed Rule Change to List and Trade the Shares of the ProShares Bitcoin ETF and the ProShares Short Bitcoin ETF (Release №34–83904; File No. SR-NYSEArca-2017–139, 2018).
 Huillet, M. 2018. SEC Rejects 9 Bitcoin ETF Applications from ProShares, Direxion and GraniteShares. [https://cointelegraph.com/news/sec-rejects-9-bitcoin-etf-applications-from-proshares-direxion-and-graniteshares]. Accessed September 2, 2018.
 Williams-Grut, O. 2018. The Justice Department is Investigating Crypto Market Manipulation — Here’s Why It’s Such a Big Problem. [https://www.businessinsider.com/why-cryptocurrencies-are-susceptible-to-market-manipulation-2018-5]. Accessed September 2, 2018.
 Wikipedia, 2018. Economics of Bitcoin. [https://en.wikipedia.org/wiki/Economics_of_bitcoin]. Accessed September 2, 2018.
 Marshall, A. 2018. Winklevoss Twins Bitcoin ETF Application Rejected by SEC. [https://cointelegraph.com/news/cnbc-winklevoss-twins-bitcoin-etf-application-rejected-by-sec]. Accessed September 2, 2018.
 Rooney, K. Pisani, B. 2018. Winklevoss Twins Bitcoin ETF Rejected by SEC. [https://www.cnbc.com/2018/07/26/winklevoss-twins-bitcoin-etf-rejected-by-sec.html]. Accessed September 2, 2018.
9] Investopedia. 2018. Blockchain ETF. [https://www.investopedia.com/terms/b/blockchain-etf.asp]. Accessed September 2, 2018.
 Aru, I. 2017. Why an ETF is a Bad Idea for Bitcoin. [https://cointelegraph.com/news/why-an-etf-is-a-bad-idea-for-bitcoin]. Accessed September 2, 2018.
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