As the demands for the development of a bitcoin exchange traded-fund (ETF) have piled up to a new high, the Chief Executive Officer of Fatfish Internet Group, Kin-Wai Lau is of the view that in a matter of couple of months” the establishment of the bitcoin ETF will become inevitable as the institutional drive behind the demand is so high.
Talking to CNBC, he stated that as the trading volumes grow higher and higher with strong institutional demand driven by adoption, the possibility of this demand getting an acceptance is very high in the near future. He suggested that it could be considered as the second wave rally for bitcoin and other cryptocurrencies.
A second wave rally for cryptocurrencies from CNBC.
Kin-Wai Lau stated that:
It’s a very strong wave; it’s driven by institutional demand, it’s driven by adoption. [There’s] lots of interest this time around — trading volume is several times higher than during the lows.
The need for acceptance for establishing a bitcoin ETF is growing more and more with developments being made in the bitcoin market, and it will be only a couple of months before crypto market accepts the development of a bitcoin exchange traded fund, protecting investors ultimately leading to the security and stability of the market. Lau stated that:
I think we’re not far away; I think probably just a couple of months away from being ready for the market to generally accept an ETF.
The major reason behind the bitcoin ETF not getting approved by the United Stated Securities and Exchanges Commission (SEC) is the use of crypto market for performing fraudulent and manipulative practices by some behind-the-door factors. Quite recently, SEC rejected the proposal for the establishment of a bitcoin ETC posed by the Winklevoss twins, backed by Bats BZX. The stated reason behind the rejection was the lack of any proper framework for controlling the illegal activities that are percolating across the cryptocurrency world. It was stated by the SEC that:
Although the Commission is disapproving this proposed rule change, the Commission emphasizes that its disapproval does not rest on an evaluation of whether bitcoin or blockchain technology more generally has utility or value as an innovation or an investment. Rather, the Commission is disapproving this proposed rule change because as discussed in detail below, BZX 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 its rules be designed to prevent fraudulent and manipulative acts and practices.
As soon as the rejection was announced, bitcoin market saw a sudden nose dive in its price value, but then stabilized again in a relatively short period of time showing volumes are still coming in the market. As the need of a crypto-linked ETF is necessary for the big financial spearhead institutions to enter market, the decision made by the SEC was dissented by one of its very own commissioner, Hester M. Peirce. She was of the view that the role of the SEC is to provide investors the protection and opportunities they need. By denying the establishment of a bitcoin ETF, the SEC is not fulfilling its incumbent duties, she stated that:
“The Commission’s mission historically has been, and should continue to be, to ensure that investors have the information they need to make intelligent investment decisions and that the rules of the exchange are designed to provide transparency and prevent manipulation as market participants interact with each other. The Commission steps beyond this limited role when it focuses instead on the quality and characteristics of the markets underlying a product that an exchange seeks to list”.
She also stated that the investors should be given the option of entering or avoiding the bitcoin market, the SEC’s duty is to present them with the opportunities they need in order to grow.
If we were to approve the ETP at issue here, investors could choose whether to buy it or avoid it. The Commission’s action today deprives investors of this choice. I reject the role of gatekeeper of innovation—a role very different from (and, indeed, inconsistent with) our mission of protecting investors, fostering capital formation, and facilitating fair, orderly, and efficient markets. Accordingly, I dissent.
On the other hand, unlike the suggestions made by the CEO of Fatfish Internet Group, Brian Kelly, the Chief Executive Officer of BKCM is of the view that the establishment of a bitcoin ETF might not take place just this fast. He suggested that 2018 might not be the year in which such an action would take place owing to all the concerns that the SEC still poses. The resolution of these concerns might take time. He stated that:
I also hope there is an ETF. But I think the chances of a bitcoin ETF in 2018 are relatively low. There is still quite a few things. That doesn’t stop speculation on that. That’s one reason why we’ve seen this bottoming process here from $5,800 to $8,500.
All in all, although the SEC is denying the proposals of establishing a bitcoin ETF as of yet, it is still holding off on passing its comments regarding the proposal made by SolidX, backed by VanEck, till mid September. In order to analyze the vulnerabilities and shortcomings associated with the establishment of a bitcoin ETF, the SEC has decided to take more time for considerations. The SEC announced that:
The Commission finds it appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider this proposed rule change. Accordingly, the Commission designates September 21, 2018, as the date by which the Commission shall either approve or disapprove the proposed rule change.
Regarding this proposal, VanEck has also addressed the concerns raised by SEC regarding the crypto market in an official letter posted on the SEC’s website. In the letter, the concerns of valuation, liquidity, custody, arbitrage and potential manipulations of the market posed by the SEC are addressed.
So, as we move forward in time, with SEC’s concerns being handled appropriately, it might be possible that the prediction made by the CEO of Fatfish Internet Group might become a reality, owing all the institutional drive that lying behind it.