Credit:iStock.com/ByoungJoo
Once again, regulators at the U.S. Securities and Exchange Commission (SEC) have rejected applications for Bitcoin-based exchange-traded funds (ETFs), citing volatility as their main concern.
Three different funds submitted proposals for the ETFs. However, all three put distance between the proposed product and the underlying asset, meaning that the ETFs would not hold Bitcoin directly. Instead, the fund would track Bitcoin futures.
One of the firms, Direxion Shares ETF Trust, released a statement on January 8 to explain what happened.
“On a call with the Staff on January 5, 2018, the Staff expressed concerns regarding the liquidity and valuation of the underlying instruments in which the Fund intends to primarily invest and requested that the Trust withdraw the Amendment until such time as these concerns are resolved. In response to the Staff’s request, the Trust respectfully requests withdrawal of the Amendment.”
(Source: “Bitcoin ETF Proposals Withdrawn After SEC Pushback,” CoinDesk, January 9, 2018.)
Allow me to translate the above language into Plain English: The SEC is worried about Bitcoin’s crazy price swings.
To be entirely honest, that’s a reasonable thing to worry about. Markets are simply not built for 20% intraday moves; volatility on that magnitude is supposed to be a freak event. And yet it happens to cryptos on an almost daily basis.
Daily Ethereum Chart
While this news knocked Bitcoin’s price down another four percent, it did nothing to prevent Ethereum’s ascent above $1,300. In fact, ETH prices gained 12.44% against the U.S. dollar, putting the Ethereum to USD rate at $1,349.18.
But why should it impact Ethereum prices? The proposals concerned Bitcoin ETFs, after all.
Well, the rise in ETH prices was supposedly based on the emergence of an Ethereum futures market, which would in turn lead to the creation of Ethereum ETFs. Analysts consider this the yellow brick road for cryptos, because it gives institutional investors a reasonable basis for investing in assets that are off limits to them at present.
But the SEC just made this much, much more difficult.
If they rejected Bitcoin on the basis of volatility, then why would they let Ethereum ETFs through the door? ETH prices are no less volatile than Bitcoin. In fact, today’s 12% price growth is a testament to Ethereum’s extreme volatility.
Analyst Take
I find the SEC’s stance a little disheartening, but it isn’t enough to alter my $1,500 Ethereum price forecast for 2018. That level is still within grasp.
Source: Price Confidential