At a meeting with the US Securities and Exchange Commission (SEC) commissioner Elad L. Roisman, representatives from SolidX, VanEck, and CBOE presented five major reasons why the commission should approve the Bitcoin exchange-traded fund (ETF) filing of VanEck and SolidX.

VanEck, an investment management firm headquartered in New York that has decades of track record in the traditional finance sector and hundreds of ETFs filed under its name, outlined the following points the SEC should consider in approving its Bitcoin ETF:

  1. There now exists a significant regulated derivatives market for bitcoin
  2. Relevant markets – CBOE, bitcoin futures, OTC desks – are regulated
  3. Concerns around price manipulation have been mitigated, consistent with approval of prior commodity-based ETPs
  4. CBOE’s rules are designed to surveil for potential manipulation of Trust shares
  5. Promotes investor protection

Significant Volume and Trading Activity in the Futures Market

Previously, the SEC rejected the Winklevoss Bitcoin ETF primarily due to its reliance on a public cryptocurrency exchange in Gemini to find the base price of BTC. The SEC deemed cryptocurrency exchanges to be insufficiently regulated and liquid to handle an ETF.

As a response to the rejection of the Winklevoss Bitcoin ETF, ProShares and two other companies filed 9 ETFs, basing the BTC price of the ETFs on the futures market operated by CBOE and CME Group. At the time, the filling of ETFs by the three companies was considered a smart move as it considered the SEC’s concerns regarding cryptocurrency exchanges.

However, the SEC rejected the 9 ETFs and stated that the futures market is not of significant size to support an ETF.

SEC cryptocurrency regulation

During its presentation, VanEck, SolidX, and CBOE representatives told the SEC that the futures market is able to handle the operation of an ETF through the Depository Trust & Clearing Corporation (DTCC), which was especially relevant given the involvement of CBOE in the filing.

VanEck also emphasized that the approval of an ETF would reduce counterparty risk for investors and it would provide a simple solution for investors seeking price exposure, by increasing the stability of the market.

“As of now, no CCPs support the clearing of bitcoin Investors are left facing absolute counterparty risk. Such risks are often unacceptable to many investors An ETF provides a straightforward solution for investors seeking price exposure without facing counterparty risk, as the ETF would be cleared through DTCC Furthermore, in creations and redemptions, the Trust always requires APs and trading counterparties to settle their leg of the trade before the Trust will do so.”

The claim of VanEck directly supports the statement of SEC commissioner Hester Peirce, who previously stated that the current structure of the cryptocurrency exchange market only allows a selected group of investors with specific know-how and knowledge in the market to trade and benefit off of the liquidity in the market.

“This complexity means that only a very particular type of investor can pursue the diversification opportunities such assets can provide. Entrepreneurs are developing new products through which people can access cryptocurrencies indirectly or hedge their cryptocurrency holdings. Bitcoin futures, for example, began to trade recently,” she explained.

VanEck Has the Highest Chance

Throughout the past several months, analysts have given VanEck and SolidX the strongest chance of having an ETF introduced in US markets given the history of VanEck in successfully filing hundreds of ETFs with the SEC.

This post credited to ccn Images from Shutterstock

Throughout this year, during a 69 percent correction, only 25 percent of Bitcoin were moved between addresses, suggesting that 75 percent of Bitcoin had not changed hands.

That is nearly a 58 percent decline in Bitcoin user activity since 2017, during a period in which BTC  surged to a new all-time high at $20,000 and the cryptocurrency market reached a valuation of $800 billion.

Analysts expected a higher percentage of Bitcoin in circulation to change hands throughout the past 11 months despite the bear market, given that many new investors have entered the market through alternative platforms such as the CBOE and CME Bitcoin futures markets.

The launch of the Bakkt Bitcoin futures market in December and the release of the Goldman Sachs and Morgan Stanley cryptocurrency derivative products are also expected to increase the user activity of crypto, growing the liquidity of the stagnant cryptocurrency market.

Bitcoin is Still in Recession

Speaking to Bloomberg, Coin Metrics co-founder Nic Carter stated that the noticeable decline in the user activity of Bitcoin demonstrates the market is still in recession. Less new investors have entered the market since late 2017.

“It tells me we are still in a Bitcoin recession,” Carter said, adding that a dip in user activity enables the evaluation of the actual liquidity of the asset. “I think it helps us assess ‘true liquidity’ in the idealized, global order book sense. To some degree, I think it lets you roughly calibrate the effect of future inflows.”

In bear markets, Carter emphasized that less than 30 percent of BTC in circulation are available to the public through cryptocurrency exchanges, as the vast majority of investors tend to hold onto their long-term investments.

Still, according to cryptocurrency market data providers, the daily trading volume of BTC is estimated to be around $4 billion. At its peak in January, the volume of BTC neared $10 billion, led by leading markets such as Japan and South Korea.

As such, DA Davidson & Co. institutional equity director Gil Luria noted that BTC does not have a liquidity issue, as the $4 billion daily trading volume allows any investor to liquidate an entire position in one trading day.

Cryptocurrency exchanges operate 24 hours a day and seven days a week, without closing and opening periods dissimilar to stock markets and traditional exchanges. Hence, the $4 billion daily trading volume is more meaningful if the fact that the cryptocurrency exchange market operates without downtime is considered.

“That does not mean there is a liquidity issue. Four billion of volume a day means almost any investor in Bitcoin can liquidate their entire position within one trading day,” Luria said.

One Positive Takeaway

This year, Bitcoin suffered one of its worst correction in recent years, the fourth-worst crash in the past nine years.

The decision of many investors in the market to hold onto their Bitcoin investments regardless of a 69 percent drop in price demonstrates confidence towards the long-term price trend of the dominant cryptocurrency, and more importantly, that investors are considering crypto as a long-term investment rather than a short-term position.

This post credited to ccn Image from Shutterstock.

The blockchain investment arm of U.S. internet retailer Overstock announced that its investment choice Bitsy has begun a limited beta launch of its cryptocurrency wallet and exchange, the companies confirmed in a press releaseFriday, September 14.

Bitsy, which seeks to offer users custody of their holdings via private keys while facilitating password recovery using biometric security, will initially support Bitcoin (BTC) buying, with undisclosed altcoin assets to follow.

As a bonus, Overstock CEO Patrick Byrne confirmed, customers would now be able to purchase Bitcoin directly from its website via the integration with Bitsy.

“Bitsy sets a new standard for cryptocurrency wallets. It is a game-changer because it gives users the freedom that bitcoin has always promised,” he commented in the release:

“[I]ntegrating with Bitsy will allow Overstock to take the next step in its cryptocurrency journey by allowing the company to offer bitcoin for sale directly from the retail website.”

The move marks the latest commitment to Bitcoin from the retail giant, which first began accepting the cryptocurrency in January 2014.

Earlier this month, Byrne surprised many by selling 10 percent of his equity in the company in order to reinvest the proceeds in two investment projects and satisfy tax obligations.

Another Overstock subsidiary, tZERO, wrapped up its (Initial Coin Offering) ICOproceedings last month, with plans to build an ICO token trading platform.

 

This post is credited to cointelegraph  Image source: Cointelegraph

There are few traders who aren’t aware that the Intercontinental Exchange (ICE) joined the cryptocurrency party several weeks ago. It turned into some of the biggest news of the year so far. What exactly does this mean for the crypto and global markets?


DON’T TRUST EVERYONE WITH YOUR MONEY — ASK A TOP WORLD UNIVERSITY.

Few institutions are more entitled to discuss technology than MIT. That’s exactly why the MIT Technology Review has just published a piece on this major event for both crypto and global markets. According to the Review, a mass of institutional investors in waiting for a sign to bring money to the table have just received the sign. Perhaps the ICE will provide just the controlled environment they needed in order to boost their confidence in cryptocurrencies.

However, a surprise may be in store as ICE attempts to apply the same rules used for financial markets to crypto. Yet, the two are fundamentally different. Don’t forget the roots of Bitcoin as an alternative to everything that money, banks, and finance represent: it is the opposite of many facets typically related to money and stocks. In fact, Bitcoin — and cryptocurrency as a concept —  solve many of the issues and anomalies presented by stock markets. Wall Street and blockchain savvy “evangelist” Caitlin Long explained why Bitcoin’s “perfection” can turn into a major disadvantage for those who treat it as a common stock or asset.

 

CRYPTOCURRENCIES ARE THE ANSWER WHERE THE STOCK MARKET FAILS

  • Cryptocurrencies are owned and managed by the trader him/herself, while stocks and assets are possessed by market mediators (e.g. exchanges), really;
  • Cryptocurrency transactions and related operations run on a distributed, (most often) decentralized ledger, and are therefore immutable. Wall Street companies can manipulate transaction/asset ownership in order to appear as if stocks were their own.
  • The blockchain solves the double-spending problem. When stocks, transactions, and markets are managed by centralized institutions, the trading process is exposed to a variety of technical vulnerabilities. Some are quite serious. MIT points out to the case of Dole Foods in 2015-2016 when the company apparently sold 33% more share than it actually had for sale due to a glitch in the trading process.

REMAINING OPTIMISTIC

To end on a positive note, Long also pointed out the advantages this move will bring to the market in an earlier article in Forbes. Long thinks that ICE’s upcoming cryptocurrency exchange provides a solution to the custody issue encountered by big investors (managing >$150 million) who are required by the SEC to collaborate with a qualified custodian. The exchange will also add a certain degree of confidence, and a note of “mainstream adoption.”

Finally, the fact that cryptocurrencies solve some problems of stock markets may determine how companies raise their capital through ICO’s. “I doubt it will be very long before major corporate issuers join Telegram and Eastman Kodak in raising capital via these markets,” was Long’s conclusion.

 

This post credited to bitcoinist  Image source: Bitcoinist