The SEC’s Delay: A Cold Shower for Investors
The U.S. Securities and Exchange Commission (SEC) has once again delayed its decision on approving Bitcoin ETFs, including one from BlackRock, the world’s largest asset manager. This move has led to a 5% drop in Bitcoin’s price, unwinding most of the gains it had made after a Washington court ruled in favor of Grayscale’s Bitcoin Trust becoming an ETF. The SEC has been under pressure to change its decade-long policy of refusing ETFs based on Bitcoin, especially after the court ruling. The regulator now has 45 days to decide its next steps, which are expected to be announced in mid-October.
The Misleading Pump: A Tale of Miscommunication
A couple of days ago, Bitcoin saw a temporary price pump due to some misleading reporting and misunderstandings within the community. The price of Bitcoin had surged by 7% to nearly $28,000, and Coinbase, the largest publicly traded U.S. crypto exchange, jumped 15%. This was largely because of a court ruling that overruled an SEC decision denying Grayscale Investments permission to launch a Bitcoin-focused ETF. However, the euphoria was short-lived as the SEC’s recent delay brought the market back to reality.
The SEC’s Concerns: Market Manipulation and More
The SEC’s primary argument against approving a spot Bitcoin ETF has been the potential for market manipulation. Gary Gensler, chair of the SEC, has even described the crypto market as “rife with fraud, rife with hucksters.” Despite these concerns, the SEC has approved Bitcoin futures ETFs, which track the price of futures linked to the cryptocurrency. The regulator’s stance has been questioned by many, especially after the Washington court forced it to review its approach to Bitcoin ETFs.
The Stakeholders: From BlackRock to Coinbase
BlackRock, Fidelity, Invesco, and other traditional financial players have sought permission to launch their own Bitcoin funds. Coinbase’s involvement in the ETF filings further complicates the issue. The exchange has proposed surveillance-sharing agreements with regulated exchanges hosting the potential ETF listings. However, the SEC has previously sued Coinbase for allegedly violating U.S. securities laws, adding another layer of complexity to the approval process.
The Road Ahead: What’s Next?
The SEC is at a crossroads. It must decide whether to abide by the court’s decision, ask for a review, or make a direct appeal. Analysts like Mark Palmer from Berenberg Capital Markets believe the SEC might craft alternative arguments to continue rejecting spot Bitcoin ETF applications. However, the court’s ruling has put the SEC in a tight spot, challenging its long-standing arguments against these products.
In summary, the SEC’s delay in approving Bitcoin ETFs has sent ripples through the market, causing both surges and slumps in Bitcoin’s price. The regulator’s concerns about market manipulation remain a significant hurdle, but recent court rulings have put these arguments under scrutiny. With traditional financial giants and crypto exchanges like Coinbase entering the fray, the SEC’s upcoming decision will be a pivotal moment for Bitcoin and the broader crypto market.