Another ETF Rejection, and yet, Bitcoin Survives

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As many expected, the SEC has rejected all ETF proposals from Proshares, GraniteShares and Direxion. The rejection of ETFs from these 3 entities totals to 9 proposal rejections. Staying true to form with last month’s rejection of the Winkelvoss ETF, the SEC asserts that the proposals had not done a sufficient job to prove that they were designed to prevent fraudulent practices:

“[T]he Commission is disapproving this proposed rule change because, as discussed below, the Exchange has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that a national securities exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”

It’s important to keep in mind that the ProShares submission was previously met with disapproval, and that August 23 was the final deadline for a decision. The SEC cited in their decision:

“The Funds do not intend to hold Bitcoin Futures Contracts through expiration, but instead intend to either close or “roll” their respective positions.”

While these rejections for approval are not positive news, there are a couple of key things to remember. First, one of the strongest cases and most anticipated proposals, filed by VanEck / SolidX, seeking to list a Bitcoin ETF on the CBOE is still pending. While this decision was postponed earlier this month, their decision regarding approval could be announced as early as late September, but no later than February 16, 2019. Finally, despite the rejection of, again, 9 ETF proposals, the price of Bitcoin did not see a dramatic fall, as was seen after the Winkelvoss rejection and VanEck postponement. The price of Bitcoin fell only about 2.8%, which is well within the typical volatility scale for the nascent market. Dan Morehead, of Pantera Capital (crypto-hedge fund) explains:

“I still think it will be quite a long time until an ETF is approved. The last asset class to be approved for ETF certification was copper, and copper has been on earth for 10,000 years. (…) The ETF rejection is the same story we’ve had for five years. The SEC has been very cautious with an ETF.”

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