Curse or blessing – Does Bitcoin really need a Bitcoin ETF?

  • A Bitcoin ETF is regarded by many experts as enormously important to ensure further growth of Bitcoin and the crypto market. 
  • However, other financial markets show that a Bitcoin ETF does not only have to have positive consequences. 
  • BKCM’s Brian Kelly sees Fidelity and TD Ameritrade as two major opportunities for the crypto market. 

Last week, the US Securities and Exchange Commission (SEC) rejected Bitwise’s Bitcoin Exchange Traded Fund (ETF), shattering the crypto community’s apparently last hope for a Bitcoin ETF in 2019. Although the year 2019 is far from over, the Bitwise Bitcoin ETF was probably the last chance to approve a Bitcoin ETF in 2019.

Although there is another Bitcoin ETF proposal from Wilshire Phoenix, which the SEC has postponed in September until December 28, 2019. Nevertheless, very few experts expect an approval, as the SEC once again has the option of extending the deadline by 60 days. Bitwise had previously made numerous efforts to prove to the SEC that the Bitcoin market is mature and now offers a well-regulated trading environment. Bitwise, as reported by CNF, published several reports to prove this.

However, these statements did not seem to convince the SEC. In a 100-page document, the SEC explained why the Bitwise Bitcoin ETF could not be approved. According to the SEC, Bitwise was not able to prove why 95% of the Bitcoin market was not based on counterfeit trading volumes:

The Sponsor asserts that 95% of the spot bitcoin market consists of fake and non-economic activity, but has not established that the “real” Bitcoin market is isolated from that fraudulent and manipulative activity.

Another key issue identified by the SEC was the lack of joint market surveillance agreements between the major crypto exchanges and the exchanges where an ETF product is traded:

The Commission also notes that the NYSE Arca has not stated that it has or will enter into monitoring arrangements with these “real” spot platforms using monitoring tools. Even if the NYSE Arca were to enter into such agreements, it is not clear what ability the NYSE Arca would have to force exchanges to collect monitoring data.

Is Bitcoin really that manipulated?

Compared to other traditional financial markets, Bitcoin may not be as manipulated as it appears. As Forbes reported in May 2019, market manipulation is not uncommon in the financial sector under the motto “Another day, another banking scandal”. In May, the European Commission fined five major banks 1.07 billion euros for manipulating the international foreign exchange market (Forex).

Forbes reports that the financial services sector is already the least trustworthy sector (freely translated):

Financial services is already the least trusted sector among seven others worldwide, according to the 2019 Edelman Trust Barometer. News of the coordinated forex rigging—which follows other high-profile scandals such as the Libor scandal, Wells Fargo fake account scandal, gold fixing scandal (which I’ll get to later), among many more—is unlikely to improve public sentiment.

In particular, the manipulation of the gold price is a well-documented phenomenon. In 2014, Barclays was fined nearly $44 million. At the end of 2018, a former JP Morgan trader pleaded guilty to manipulating US metal markets.

Chris Powell, treasurer of the Gold Anti-Trust Action Committee (GATA), a nonprofit and civil law organization that monitors the gold price, stated in 2018 that gold ETFs are largely “paper gold”. According to Powell, this gives the banks “a tool to keep prices under control in cooperation with the central banks”.

Bitcoin, as “digital gold”, could also be in the focus of banks as it has been developed as an alternative to sovereign currencies. The statements of the IMF and the Bank for International Settlements (BIS) should also be seen in this context. Both institutions have put Bitcoin in a bad light several times in the past. Another famous example is Jamie Dimon (CEO of banking giant JP Morgan Chase), who called Bitcoin a “fraud” last year. He also threatened to fire all the bank giant’s dealers if they traded Bitcoin.

Brian Kelly: A Bitcoin ETF is not necessary

A few days ago, on 11 October, Brian Kelly of BKCM spoke at CNBC “Fast Money” about whether the crypto market needs a Bitcoin ETF. Kelly explained that a Bitcoin Exchange Traded Fund (ETF) is not needed for the growth of the crypto market. He justified this with the fact that BTC is available on Fidelity and TD Ameritrade, which are regulated platforms:

Ultimately, you will be able to buy Bitcoin in a normal brokerage account, or it will look like a normal brokerage account. So I’m less worried that you’ll need a Bitcoin ETF at this point.

Sasha Fleyshman, a investment manager at Arca, agreed with Kelly and explained on Twitter that a Bitcoin ETF is not necessarily needed, as there are already deposit and investment solutions available that allow institutional entry.

Whether a Bitcoin ETF will have a positive or negative impact on the Bitcoin price and the crypto market will only be seen when the SEC approves one. However, even without a Bitcoin ETF, the crypto market still has great potential for growth.

About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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