Bitcoin ETF rejection shows SEC not fully game for price volatility

Karthik Subramanian

The Securities and Exchange Commission (SEC) had rejected an application from VanEck on Friday for a spot Bitcoin Exchange-traded fund (ETF) that it had proposed sometime back, though the commission has allowed other bitcoin related ETF listings recently.

The main difference between this ETF and the others that were approved over the last few weeks by the SEC is the fact that the approved ones were based on Bitcoin futures while this one was based on the spot which means that its value depends a lot on the value of bitcoin itself. While futures are derived instruments which means that the means and the methods used are pretty much the same across almost all instruments, the spot prices are based directly on the underlying and hence its value and the strategy used for trading them would have to vary across instrument classes as each of them would have different characteristics, for example, bitcoin spot is known for its very high volatility not seen in most other instruments.

This is the reason why it was pretty much clear that the SEC was not in favor of such ETFs at this time and the rejection came as no surprise to the experts even though there was a panic sell-off of Bitcoin from the retail market following this news. The SEC cited the risk of market manipulation and other related risks not being accounted for and the submission did not have any strategy to account for the prevention of fraudulent and manipulative practices.

It must be noted that approvals for Bitcoin ETFs were pending with the SEC for a very long time which had increased the uncertainty in the crypto market but it was only last month that the SEC finally decided to go ahead with the approvals for 2 Bitcoin ETFs that were based on the futures. These have been trading in the markets since then and have generally received a lot of support, investments, and positive feedback as well. VanEck has also received approval for its Bitcoin Futures ETF but it has not launched trading on it as yet. It is unlikely that the SEC would approve any ETFs based on Bitcoin spot in the near future as the prices continue to be pretty volatile as the market is not fully mature as yet. It would choose to wait for the markets to settle down and volatility to become lesser before it starts thinking of approving such ETFs.

Read this next

Digital Assets

Mike Novogratz’s Galaxy Digital expands in Europe

Galaxy Digital, the New York-based cryptocurrency financial services company founded by Mike Novogratz, is expanding its presence in Europe by appointing Leon Marshall as its first European CEO.

Metaverse Gaming NFT

Turingum Partners with MarketAcross to Drive Web3 Adoption in Global and Japanese Markets

Global blockchain PR leader MarketAcross joins forces with Japanese Web3 specialist Turingum to mutually expand its market reach, aiming to fortify Turingum’s worldwide footprint and MarketAcross’s presence in the lucrative Japanese blockchain landscape.

Digital Assets

Binance to delist all stablecoins in Europe next year

During a public hearing with the European Banking Authority (EBA), an executive from Binance said that the exchange could ultimately delist stablecoins from its European platforms by June 30, 2024.

Industry News

“Unconscionable conduct”: ASIC fines National Australia Bank $2.1m for overcharging customers

NAB faces a $2.1 million penalty for unconscionable conduct, as the Federal Court rules the bank knowingly overcharged customers, and took over two years to rectify the situation.

Industry News

SEC charges $15 million Ponzi scheme targeting Mexican-American community

Armando Gutierrez Rosas purportedly intended to invest these funds in U.S. real estate and mining operations in Mexico, assuring investors of monthly returns as high as 10 percent. Instead, Gutierrez operated a Ponzi scheme, diverting investor funds to cover his personal expenses, which notably included the acquisition of a $2.5 million mansion in Texas.

Digital Assets

Chainlink launches cross-chain interoperability protocol on Arbitrum One

Chainlink and Arbitrum join forces to bring the Chainlink Cross-Chain Interoperability Protocol (CCIP) to Arbitrum One, offering Web3 developers a powerful tool to build secure and interconnected applications across blockchains.

Executive Moves

STT appoints Brian Saldeen as Senior Risk & Margin Product Manager

Sterling Trading Tech welcomes Brian Saldeen to spearhead the development of their Risk & Margin offering, bolstering their cutting-edge solutions in the capital markets.

Industry News

Altruist eliminates brokerage account fees for advisors who choose their custody

Altruist, the modern custodian for independent RIAs, takes a bold step by eliminating portfolio accounting software expenses for all Altruist brokerage accounts, potentially saving advisors tens of thousands annually.

Retail FX

Exploring India’s Forex Market Timings With Insights From Experts

Traders Union experts identify the most profitable Forex trading windows for Indians as between 6.00-12.00 GMT and 18.00-0.00 GMT, emphasizing the importance of timing and market conditions in a rapidly evolving Indian financial landscape.