If you’re thinking of where to buy Bitcoin ETF next year, this won’t be very good news for you. This is because no bitcoin ETF may be approved soon judging from statements emanating from the SEC chairman Jay Clayton.
According to Clayton, the Securities and Exchange Commission is thinking twice about making any considerations regarding a bitcoin ETF anytime soon because in their belief there are no Bitcoin exchanges that are transparent enough for the market to be trusted.
This is a surprise and setback for the community that has been expecting that some bitcoin ETFs will be approve in Q1 of 2019.
Not Yet Time for Bitcoin ETF
Clayton speaking at the Consensus Invest Conference in New York said,
“What investors expect is that trading in the commodity that underlies that ETF makes sense and is free from the risk of manipulation. It’s an issue that needs to be addressed before I would be comfortable.”
This may have foreclosed the possibility that any of the applications made to the agency will receive any serious considerations in the short term.
Market Manipulation Still A Concern
It is obvious that Clayton feels that this will be an easily manipulated market considering that there has been suspicion that Bitcoin was manipulated during the massive bull-run leading to an all-time-high of nearly $20,000 in December 2017.
Bitfinex the company behind the issuance of Tether the stable coin that has been alleged behind the manipulation is still being scrutinized by authorities causing the coin to value to plunge as traders lose confidence in its claims that the coin is backed by equivalent amount of USD.
The Winklevoss brothers the twins behind Gemini exchange seem to be aware that there was a slim chance of the agency approving their ETF application.
Perhaps they have insider knowledge that SEC does not see the Bitcoin market as having the capacity or the tools necessary to run an ETF which would enable investment in the Bitcoin market without actually owning bitcoins.
The trend being observed presently is that SEC is looking at the possibility of tightly regulated exchanges while the coin market develops tools that will make the regulator confident that the market is beyond blatant manipulative practices.
This Still Happens in Coin Market
In a paper released early this year, a University of Texas finance professor identified the absence of regulation in the market as making BTC a prime target for what he called behind –the-scene influence. According to him,
“There’s very little monitoring of manipulative trading, spoofing and wash trading,” Griffin said. “It would be easy to spoof this market.”
There have been identifies instances of spoofing in which orders have been placed with the intent of nudging coin price in a particular direction. These will be cancelled when the desired objective is met.
For instance, last year, a crypto blogger flagged an order of $1 million as spoofy after the trader failed to redeem it. The essence basically is luring in traders and investors through these manipulative practices by creating artificial demand or supply.
Though in Bitcoin market, this may not be as obvious through market observation, so small cap coins, these practices are more apparent.
Then Safety of Bitcoin Investments
Another concern expressed by the agency is with respect to custodianship services for Bitcoin. Even though Coinbase recently launched the Coinbase custody and itBit has been rated highly, SEC is still concerned over the number of theft recorded in the nascent industry.
This situation is one that the agency wants to see improvement in before bitcoin ETF would even be given serious considerations again.
According to the SEC Chairman,
“We’ve seen some thefts around digital assets that make you scratch your head. We care that the assets underlying that ETF have good custody, and that they’re not going to disappear.”
Obviously, the agency is looking at not just the right tools and eagerness on the part of players, it wants to know that the market has long term outlook among these players before giving the industry what can be perceived as a clean bill of health.
At present, the prospect of adding bitcoins to portfolios without owning some yourself is a long way off. So if you’re thinking of where to buy bitcoin ETF, among the few options you have is considering Bitcoin Investment Trust GBTC where investors are permitted to hold small amounts of BTC per share.