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Are Bitcoin ETFs on the Way?

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CBOE’s intent to list the first bitcoin ETF made its way to Washington’s top securities regulator last week after the exchange called on lawmakers to reconsider their hardened stance toward crypto-backed funds.

CBOE Addresses Concerns Over Crypto Funds

In a Mar. 23 letter to the U.S. Securities and Exchange Commission (SEC), CBOE President Chris Concannon addressed the regulator’s concerns over crypto-market manipulation and fraud.

In the letter, Concannon said the CBOE was uniquely positioned to understand the risks associated with crypto-backed assets, given its success in launching the first bitcoin-based futures contract in December.

“While cryptocurrency-related holdings do raise a number of unique issues, CBOE firmly
believes that such holdings do not require significant revision to the well-established
frameworks for evaluation related to valuation, liquidity, custody, arbitrage, and
manipulation,” Concannon said, adding that “each Cryptocurrency Fund and underlying cryptocurrency-related holdings should be evaluated on a case by case basis in a manner very similar to previous funds and their underlying holdings.”

Despite a rocky start, the CBOE head indicated that bitcoin futures were trading at higher volumes – a trend that is expected to accelerate in the future and possibly bring bitcoin in line with commodity futures.

Concannon’s comments were a direct response to a letter published on the SEC website in January, where the regulator expressed concerns about cryptocurrency to trade associations. In light of those risks, the letter said SEC staff have “significant outstanding questions concerning how funds holding substantial amounts of cryptocurrencies and related products would satisfy the requirements of the 1940 Act and its rules.”

The 1940 Act refers to the Investment Company Act of 1940, which spells out the regulatory responsibilities of investment companies when issuing product offerings.

Multiple Attempts and Failed Starts

The quest for the first bitcoin ETF has eluded several issuers and entrepreneurs over the last 12 months. Would-be investors have been wait-and-see mode ever since Cameron and Tyler Winklevoss had their bitcoin ETF rejected by the SEC last week. Although regulators granted the brothers a second shot to make their case, concerns over manipulation and unregulated markets ultimately prevailed.

About three months ago, several fund managers officially shelved their bids to launch bitcoin ETFs after the SEC expressed long-held concerns over liquidity and valuation. The ETFs in question were brought forward by the likes of Direxion and Exchange Listed Funds, which were developing products designed tot rack bitcoin futures.

Issuers like VanEck and REX ETF also withdrew earlier applications after the SEC ruled on the Winklevoss Bitcoin Trust.

CBOE also submitted proposals to list six bitcoin ETFs last year, according to the SEC’s public filing system. As part of the submission, the exchange proposed specific rule changes that would open the door to bitcoin-related funds.

Much like futures, bitcoin ETFs are seen as a potential game changer for cryptocurrencies because it would enable more traders to access them on the open market. The ETF market is a multi-trillion-dollar industry and one that would likely welcome bitcoin products should the opportunity arise.

There’s no timetable as to when or even if bitcoin futures will hit the market. However, many are convinced that the launching of crypto-backed futures will pave the way for an exchange-traded fund in the not-too-distant future. Many in the industry have speculated that steady interest in bitcoin will lead more issuers to give their listing a go.

The head of ETF research at Morningstar gave a compelling quote back in December during an interview with the Financial Times:

“In a market where the waterfront has largely been covered, this is really the only major project that remains. The futures cover most of the SEC’s concerns by creating a cleared, regulated financial instrument.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Crypto Markets See Minor Losses as Investors Shrug Off Bitcoin ETF Withdrawal

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Cryptocurrencies posted slight to moderate declines on Thursday, as the impact of CBOE’s bitcoin ETF withdrawal was largely disregarded by traders. This can mean one of two things: traders don’t care about the ETF or have yet to fully process the news.

Market Update

Most major cryptocurrencies traded slightly lower on Thursday, though losses were generally contained to a few percentage points. Bitcoin cash (BCH) fell 3.1% to $128.45 following a promising breakout attempt on Wednesday.

Ethereum’s price declined 1.3% to $116.76. XRP edged down 0.3% to $0.3166. Stellar XLM was down 2% to trade at $0.1015.

Bitcoin’s price held below $3,600 after making only modest moves in the last 24 hours. The leading digital currency was last seen trading at $3,590.39, where it was down 0.4%.

In terms of gainers, privacy coins Monero and Zcash rose 1.3% and 1.7%, respectively. Dash climbed 1.1%. Maker added 2.8%.

Over the past 24 hours, the total cryptocurrency market capitalization has fallen by nearly $600 million to $119.8 billion. Trade volumes held steady near $15.6 billion.

Bitcoin ETF Withdrawal

As Hacked reported earlier, the Chicago Board Options Exchange (CBOE) has withdrawn its application for a proposed rule change with the Securities and Exchange Commission (SEC) that would pave the way for the VanEck-SolidX Bitcoin Trust to be listed. The application was pulled on Tuesday, with the official announcement made by the SEC on Wednesday.

Several factors may have underpinned CBOE’s decision to pull the application, which was first tabled in June 2018. For starters, the proposal wasn’t getting the attention it deserved from federal regulators amid the partial government shutdown in Washington, which has lasted for five weeks. As President Donald Trump recently noted, the budget impasse over border-security funding will likely go on for a while.

Secondly, VanEck’s chief digital asset strategist Gabor Gurbacs announced via Twitter that his firm was still working with “regulators and major market participants to build appropriate market structure frameworks for a bitcoin ETF…”

Approving a bitcoin ETF largely hinges on the size and scope of the underlying spot and futures markets. These factors determine whether the bitcoin markets are free of manipulation and provide adequate investor protection. This view has been echoed by SEC Chairman Jay Clayton.

“What investors expect is that the trading in that commodity that’s underlying the ETF is trading that makes sense, is free from the risk or significant risk of manipulation. Those kinds of safeguards don’t exist in many of the markets where digital currencies trade,” Clayton told a New York conference back in November.

The SEC rejected more than a dozen bitcoin ETFs last year. Industry observers believe that applications will face a similar fate in 2019 as regulators monitor the growth and maturity of the nascent market. More on this story: Crypto Markets Get a Boost Heading Into the Weekend as Debate Over Bitcoin ETF Intensifies.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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As Race for Bitcoin ETF Heats Up, SEC Identifies Cryptocurrency as a Top Priority in 2019

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The crypto boom of 2017 caught federal regulators by surprise. The subsequent crash of 2018 forced them to closely examine the market, including the sale, trading and management of cryptoassets. Now, the U.S. Securities and Exchange Commission (SEC) is prepared to take a proactive approach to monitoring the nascent asset class at a time when more issuers are throwing their weight behind a crypto-backed exchange-traded fund (ETF).

Crypto Becomes a Priority

In the newly released 2019 Examination Priorities, the SEC’s Office of Compliance Inspections and Examinations (OCIE) has identified cryptocurrencies as one of six regulatory focal points this year. More attention and resources will be directed at the digital asset market due to its its rapid growth and perceived risks to retail investors.

“Given the significant growth and risks presented in this market, OCIE will continue to monitor the offer and sale, trading, and management of digital assets, and where the products are securities, examine for regulatory compliance,” the report said.

The regulator added that it will conduct high-level inquiries on market participants “offering, selling, trading, and managing these products…” Market participants include broker-dealers, trading platforms and investment advisers.

The report was released less than six weeks before the SEC is set to make a decision on a highly regarded bitcoin ETF. Although the agency has rejected more than a dozen crypto ETF applications, a joint proposal put forward by VanEck and SolidX is believed to have the best shot of being approved.

That’s because the proposed product includes safeguards to protect retail investors against fraud and manipulation. It also proposes to hold a repository of physical bitcoin as opposed to futures contracts and other derivative-based products. More on this story can be found here: SEC Delays Decision on VanEck SolidX Bitcoin ETF Until Next Year.

A crypto startup by the name of Bitwise Asset Management has also applied for bitcoin ETF product with the SEC. Like the VanEck-SolidX product, the Bitwise application is attempting to address the myriad of regulatory concerns put forth by the SEC in its previous rulings on crypto-backed ETFs.

If Bitcoin ETF Doesn’t Happen by February, How Will it Affect the Market?

Japan Not Considering Bitcoin ETF: FSA

Reports that Japan was considering approving a bitcoin ETF were quickly shot down this weekend by a spokesperson from the country’s Financial Services Agency (FSA). As Bitcoin.com and CCN report, the FSA representative said, “There is no such fact that we are considering approving ETFs which track crypto-assets at present. We are not currently considering approving them.”

Last week, Bloomberg and several other sources reported that Tokyo’s financial regulators were exploring the possibility of a crypto ETF tied to bitcoin futures. The speculation put the regulator in the same boat as the SEC, which has been reluctant to approve a bitcoin fund but has nevertheless invited public dialogue on the matter.

At present, Japan does not believe there is “constructive and social significant of trading cryptoassets derivatives,” the spokesperson said.

Japan was one of the first countries to approve and regulate cryptocurrency markets, but a series of high-profile attacks on domestic exchanges forced regulators to adopt more stringent measures. Exchanges have also come together to develop a self-regulatory group to prevent further attacks from undermining the market.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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SEC Delays Decision on VanEck SolidX Bitcoin ETF Until Next Year

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The U.S. Securities and Exchange Commission (SEC) will delay its ruling on a highly-anticipated bitcoin exchange-traded fund (ETF) until next year, confirming earlier speculation on the matter. While the delay is by no means a confirmation that regulators are warming to the idea of a bitcoin ETF, it does suggest they are taking the matter seriously.

Ruling Delayed

In a notice published on Thursday, the Washington-based regulator said its forthcoming decision on the VanEck SolidX Bitcoin Trust will be pushed back until Feb. 27, 2019.

“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,” the SEC said.

A decision on the hotly debated ETF was expected by the end of December but the extent of public commentary on the matter has forced the agency to extend its time period until the new year. As of Thursday, the agency had received more than 1,600 comments on the proposed ETF. The delay is consistent with earlier reports by Hacked pointing to February 2019 as a likely timeline for resolution.

What make the VanEck-SolidX proposal so intriguing are the safeguards in place to protect investors against fraud and manipulation. The fund also proposes to hold a repository of physical bitcoin as opposed to futures contracts and other derivatives.

In a series of meetings with the SEC, members of VanEck, SolidX and CBOE have argued that the bitcoin market meets the agency’s definition of liquidity and transparency. Last week, the proponents urged the agency to apply the same definition of “significant markets” to bitcoin as it does to other markets that currently enjoy ETF status.

This isn’t the first time that a ruling on the VanEck-SolidX product has been delayed. The SEC has pushed back the deadline repeatedly since the summer while discarding more than a dozen other applications.

BTC/USD Update

Even with an ETF in play, appetite for bitcoin is the lowest it has been in more than a year. The leading digital currency fell below $3,300 Friday for the first time since September 2017. At the time of writing, the BTC/USD exchange rate was averaging $3,296 on virtual currency exchanges. That represents a daily drop of 9.8%.

Trading volumes have climbed well north of $6 billion, with futures dominating the order books. Bitcoin’s market capitalization has fallen to $57.4 billion but its share of the overall crypto universe has risen to 55.1%.

With the breach of $3,600 on Thursday, the next likely target for the bitcoin price is $3,000. Below that level, $2,800 is the next major downside target.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 773 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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