On the final day to do so, the Securities and Exchange Commission announced that they would be delaying their decision on Bitcoin ETFs. This grants the SEC an extension of 60 days to continue deliberation, with a new deadline of late September. The request, filed by Arca Inc. on behalf of their Direxion subsidiary, would have far reaching implications for the cryptocurrency industry. Exchange-traded funds open a major vector for new money to flow into the market.
An exchange-trade fund or ETF is a traditional, tradable investment fund that maintains value through representing other assets. In this instance, Direxion would hold a set amount of Bitcoin for each share of their ETF. Unlike Bitcoin itself, this ETF could be traded on traditional exchanges and would allow non-cryptocurrency investors to get involved with the industry. While entrance into the cryptocurrency market is still notoriously difficult, an ETF would use the same mechanics that are accustomed to most investors.
What a Bitcoin ETF Could Mean for the Industry
The mantra for cryptocurrency enthusiasts is to encourage ‘Greater Adoption’ of blockchain technology. A specific Bitcoin ETF would go a long way towards this goal – lending legitimacy to the entire industry. While the general public remains skeptical of cryptocurrency assets, the push for investment opportunities is reaching a fevered pitch. Large financial institutions like Goldman Sachs Group, Inc. (NYSE: GS) are exploring their options while training new personnel to deal in cryptocurrency and blockchain assets.
Further, this would introduce millions in new investments. The sudden price spike at the end of 2017 drew mainstream media attention – and brought with it a slew of new investors. This drove the price even further, and demonstrated the effect that new money can have on the market. While much of those gains are now lost, the market remains elevated from the pre-boom era.
Reasoning for the Delayed Decision
In determining whether to approve Bitcoin based ETFs, the SEC must take several criteria into consideration. Unfortunately, volatility is one of the main issues – and the SEC specifically stated that they are concerned that their own actions may cause a speculative bubble. Volatility is simultaneously one of the cryptocurrency market’s greatest attraction and worst feature. It gives investors an opportunity to turn an amazing profit but could also mean losing everything. Despite this, the SEC chose to delay the decision – not disapprove the ETFs.
The cryptocurrency community sometimes forgets that the market is still critically young. The SEC needs time to research the inner workings of the market, and to understand the technology behind it. The government is not known for making these decisions quickly or lightly. Yet, the SEC and CFTC both remained cautiously positive during their recent Senate hearings. This delay may be good for both the market itself and the potential future for Bitcoin ETFs – it will give the SEC time to make an informed decision that benefits everyone.
Article By: Adam Stone