SEC Shots Down Two Proposals

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Reflect­ing on the past year, 2021 has been great for Bit­coin and the cryp­tocur­ren­cy mar­ket. It even saw the birth of two BTC futures ETFs in the States, but with just a week remain­ing until the end of it, Amer­i­can investors might not see spot one.

SEC in no Mood for Spot Bitcoin ETFs

Accord­ing to the offi­cial doc­u­ment, the SEC reject­ed phys­i­cal­ly-backed Bit­coin ETFs pro­posed by Valkyrie and Kryp­toin. The reg­u­la­tor cit­ed sim­i­lar mar­ket manip­u­la­tion con­cerns while refer­ring to both to list and trade shares of Valkyrie Bit­coin Fund and the Kryp­toin Bit­coin ETF Trust.

It stat­ed that the two pro­pos­als did not meet its stan­dard designed to ward off fraud­u­lent and manip­u­la­tive prac­tices as well as pro­tect mar­ket play­ers and the pub­lic interest.

The two enti­ties that filed to pro­pose rule mod­i­fi­ca­tions to list and trade the two ETFs were NYSE Arca and Cboe BZX Exchange. How­ev­er, the Com­mis­sion not­ed that both “have 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 Exchange Act Sec­tion 6(b)(5).”

Besides, the US reg­u­la­tor start­ed a for­mal review of Kryptoin’s bit­coin exchange-trad­ed fund appli­ca­tion in April this year. This isn’t the first time that the Delaware-based com­pa­ny has faced rejec­tion. In 2019, the com­pa­ny failed to get a green sig­nal from the reg­u­la­to­ry authorities.

The deci­sion comes more than a month after the SEC denied VanEck’s appli­ca­tion for a spot Bit­coin ETF.

The launch of the first spot-Bit­coin ETF, remains in lim­bo for many invest­ment fund providers across the coun­try. How­ev­er, the lat­est move isn’t sur­pris­ing, as SEC Chair Gary Gensler has been very clear about his pref­er­ence.

BITO Fails to Charm Investors

After years of failed attempts, the SEC final­ly approved BITO – the ProShares Bit­coin Strat­e­gy ETF. How­ev­er, in the first two months of its trad­ing, the ETF paled in com­par­i­son to the under­ly­ing asset’s spot price.

Accord­ing to Bloomberg Intel­li­gence ETF Ana­lyst James Seyf­fart, BITO was trail­ing spot by 2.34% with just about two months of data. Going for­ward, Seyf­fart believes the fund will con­tin­ue to under­per­form spot by 13–14% in its first year. The gap between the asset and the fund is sig­nif­i­cant. As a result, many finan­cial advi­sors would opt for it.

How­ev­er, some long-term investors argue that offer­ings with a small­er allo­ca­tion to BTC futures con­tracts could, in fact, emerge as more dom­i­nant in the com­ing year.

Fea­tured Image Cour­tesy of CNN

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