The bitcoin world was dealt a big blow when regulators rejected nine exchange-traded funds tied to bitcoin futures on Wednesday.
These include two products from ProShares, two from GraniteShares, and five other proposals from Direxion.
Markets
Insider It means the world is still waiting for its first fully
regulated bitcoin ETF product. The funds would have tracked bitcoin
futures trading on regulated US exchanges, not bitcoin itself.
A
bitcoin ETF would likely make it easier for mom-and-pop to tap into the
market, which known for its volatility and market manipulation.
Still, it’s not clear if the SEC’s concerns about such a derivative product will be mollified in 2018.
John Hyland, a early leader of the exchange-traded fund industry, put the odds of a bitcoin ETF going live this year at 20%.
Hyland joined California asset manager Bitwise Asset Management
earlier this year to help get their ETF off the ground. Unlike other
proposals sent to regulators, Bitwise’s ETF would track a basket of
cryptos, not just one.
Formerly the chief investment officer of
United States Commodity Funds, Hyland is known for pioneering the
development of the first crude oil ETF, the first natural gas ETF, and
the first copper ETF.
“I was a bit surprised that the SEC bundled them all together instead
of waiting until September to give the same response to Direxion and
GraniteShares,” Hyland said, referring to the regulator’s rejection of
the nine funds.
Some market observers thought a futures-based ETF
would have had a better chance of approval since they trade on regulated
markets, but the SEC said in a statement that issuers did not convince
the agency that the markets were large enough to withstand manipulation
and support a derivative.
Volumes in bitcoin futures markets have been on the decline since late July, with only $18 million of volume trading in a day.
An ETF based on bitcoin itself also doesn’t appear to stand a chance.
Richard Johnson, a market structure specialist at Greenwich Associates,
said the SEC desires for the market to be properly monitored. But this
might be an impossible feat to overcome since much of the volumes in the
crypto markets are in overseas markets in Asia.
“If that’s what the
SEC is saying, that’s not going to change any time soon,” Johnson said.
“Unless an ETF issuer can exclude that type of volume from the contract
volume.”
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