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Derivative Bitcoin ETFs Rejected by the US SEC


There is no denying that 2018 is quite different from last year. In 2017, Bitcoin was able to reach a near $20K limit. Unfortunately, by the time 2018 entered, a series of regulatory changes made the cryptocurrency to lose its value.

Today, many are anticipating the entry of institutional investors. Many believe that a Bitcoin ETF can be a good way to attract the big players to finally be part of the crypto market. And because of this, there have been excitement on the part the crypto market whenever a crypto-related ETF is mentioned in the news. In fact, the reason why Bitcoin recently slipped below $6,000 was that of two things.

One, Cameron and Tyler Winklevoss’ Bitcoin ETF application was denied by the US Securities and Exchange Commission for the second time around. In addition to this, the US Securities and Exchange Commission postponed its decision regarding approval of crypto-related ETFs by next month.

Yesterday, the crypto market’s attention was caught by a new Bitcoin ETF that is about to be due. This time around, it was from ProShare. Unlike other Bitcoin ETF applications, it is based on Bitcoin futures.

Market Manipulation?

On August 23, the US SEC rejected all the pending derivative-baked Bitcoin ETFs filed not only by ProShares but also by Direxion. Seven ETFs were denied this time around. And one of the reasons why the agency hesitated was due to the risk of market manipulation and fraud.

This is the same reason used by the US Securities and Exchange Commision when it rejected the ETF proposal filed by the Winklevoss twins. Before the rejection, Winklevoss twins were optimistic considering that Nasdaq was involved. And this means that it ensures that Gemini’s operations remain transparent and authentic.

If you are going to ask Jake Chervinsky, who is a government enforcement defense and securities litigation attorney for Kobre Kim LLP, he mentioned that: “So why did the SEC reject all these ETFs? Basically, the decision came down to the risk of market manipulation & fraud. The SEC can only approve an ETF that is ‘designed to prevent fraudulent and manipulative acts and practices.’ In the SEC’s view, these ETFs were not”.

The SEC also wasn’t satisfied that both ProShares and Direxion are relying on futures markets. It is because the agency is actually hesitant of the reality that majority of Bitcoin trading activities are done in unregulated markets and crypto exchanges.

He added that “The SEC wasn’t impressed, finding that the bitcoin futures markets aren’t “of significant size”.

There is Still Hope?

Of course, there is still hope in the industry. There is still that chance that a crypto-related ETF is going to be approved sooner or later. You have the VanEck and Cboe Bitcoin-ETF application. For many, this has the highest probability of getting approved.

But of course, it remains to be seen if this is even going to happen. There are a lot of factors that still need to be considered.

As for the good news, Bitcoin was able to defend the key support at $6,230. In fact, Bitcoin is trading at around $6,400.


Mark Ayesa

Mark manages our editorial team, social handles and is always on the lookout for great writing talent to contribute to our site. On a day-to-day basis he ensures the content on is of the highest quality and also carries out extensive research on any current hot topics of the crypocurrency world for our writers.