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Bitwise BTC ETF decision date approaches – Is SEC approval a done deal?

October 14th, a Monday, is not that far away. It could be a milestone event or it could just be one more time that a regulator renounced the crypto revolution. Did you remember to circle the date on your calendars? It is the final day, after months and months of delays, that the SEC must make a decision on the Bitwise Asset Management application for a groundbreaking Bitcoin Exchange-Traded Fund (ETF). This decision is truly binary. It can only be a “green light” or a “red light”, no in betweens this time around.

With less than a week to go, the tension will build, as article after article speculates on what this momentous decision might entail. While industry pundits have grown numb to the possibility of a Bitcoin Trust being actually available for the retail crowd, the Head of Research at Bitwise is confident that the SEC will finally yield to market demand and allow innovation to be ruled by the verdict of the market. If it has value, the market reaction will substantiate that what, for times gone by, has only been a pipedream of loyal Bitcoiners.

There have been several articles over the past 275-day waiting period that have declared that much progress has been made on every front that has heretofore made Jay Clayton and a few of his fellow SEC commissioners “uncomfortable”. If you go down the checklist, large checkmarks abound:

  • Institution-grade custodial services – Check!
  • Monitoring software to detect the potential for price manipulation – Check!
  • Propensity for fraud and compromises of exchanges – Check, if you focus on U.S. exchanges only.
  • Fake volumes due to wash trading and robots – Check, if you only look at Top Ten exchanges where “real” volume is the rule.
  • Market volatility – Still an issue, but is it really that bad? Bitcoin has been ranging for months, with only bouts of volatility.

CNBC's ETF Edge segment recently interviewed Matt Hougan, Bitwise's Head of Research, and Cryptoglobe reported that he said: “We're closer than we've ever been before to getting a bitcoin ETF approved. Two years ago, there were no regulated, insured custodians in the bitcoin market. Today, there are nearly 10. There are big names like Fidelity and CoinBase. They have hundreds of millions of dollars of insurance from firms like Lloyd’s of London.”

The Bitcoin stage has been littered with previous applications that have been thrown on the SEC’s casualty heap, at least a dozen to date. Van Eck withdrew its application mid-stream, opting to go the “accredited investor” route. The Winklevoss Brothers, who started the process some year six years ago, have stayed on the sidelines, licking their SEC wounds, while they claim to remain committed to the process. Hougan discounts prior negative decisions and is hopeful that retail customers will get access to “one of the most exciting wealth-generation opportunities in the world”.

Hougan may be positive, but industry observers have not backed away from the prevailing opinion that more time is needed. Here is a brief sampling of negative comments from a survey taken by Cryptobriefing:

  • Nicholas Pelecanos, an advisor at NEM Ventures: “I view the approval of the Bitwise ETF as a low probability event.”
  • Christoph de Courson, co-founder and CEO of Olymp Capital: “Neither the bitcoin spot market or derivative market are really liquid enough for any institutional investment firm to consider them. Bitcoin also has extremely high volatility, which would make it very difficult to handle as part of an investment portfolio.”
  • Nick Cowan, Founder and Managing Director at the Gibraltar Stock Exchange, which launched a Bitcoin asset-backed security in 2016: “There is certainly a place for these products, but I envision this process taking longer to iron out.”
  • Martin Sabljak, Manager at blockchain incubator, Adel Ecosystem: “There’s too much negative news about scams out there. Every month we get some scam report about this and the main concern is if it’s safe enough for “grandma” to invest in.”

The opinions are at best “mixed”, but with a decided bias to the negative. The stage is set for Monday’s decision. Whatever the decision is, expect a strong market reaction.