Bitcoin’s ETF Entrance Postponed
Main page News, Cryptocurrency, Bitcoin, SEC
Hot topic
25 July

Over the last week, the price of bitcoin has made double a flip, turning the market upside down and forcing traders to tear their hair out. First, the price rises from 6,000 to more than 8,000 due to generally positive forecasts regarding bitcoin ETFs, and now it’s losing positions possible because of SEC’s statement. So what happened?

The U.S. Securities and Exchange Commission (SEC) said that it needed two more months (till September 21) to decide whether to approve five bitcoin-related exchange-traded funds (ETF) offered by the investment company Direxion Asset Management.

Direxion Asset Management presented its proposal way back in January this year. The main objective of the company is to give investors the opportunity to "get daily short, leveraged long or leveraged short exposure to the lead month bitcoin futures contract".

According to analysts, if SEC makes a positive decision and ETFs will be allowed into the New York Stock Exchange Arca platform, their profitability can be 125%, 150% or 200% of daily target benchmark. Such high expectations and forecasts became one of the drivers of bullish activity on the market and contributed to the rapid growth of bitcoin price.

However, SEC's move caused a lot of questions and concerns, that dramatically ruined bitcoin’s rate. This decision looks especially alarming if we keep in mind the fact that the Commission didn’t make any comments on the ETF application offered by VanEck and SolidX.

At the same time, some analysts are concerned about bitcoin ETFs because of the volatility of such borrowed funds. Michael Cohn, chief investment strategist at Atlantis Asset Management, said:

“[It] would be insane for them to actually approve this. Then they're putting a rubber stamp on it as an asset, and I don't think governments want to go there yet.”

At the same time we shouldn’t forget, that when you buy ETF, you actually buy a stock portfolio that tracks the profitability of a certain index. In this case, the company that manages the fund, will buy bitcoins and sell you a share of its stocks. In other words, you will not become the owner of the bitcoins, and will not be able to spend them.

All these factors, possibly, affect some delay of decision making by the Commission. One thing is certain, in case of a positive decision, we will definitely be seeing yet another take-off of the bitcoin price.

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