- The SEC has noted that none of the filing proposals have satisfyingly documented a price leadership in the price discovery process from CME. If a pronounced leadership role is identified, a surveillance sharing agreement between the ETF provider and CME may be sufficient to get information that could pinpoint any malicious entities seeking to manipulate the market and thus the ETF. Interestingly, Fidelity’s filing was accompanied by a thorough price discovery analysis documenting CME’s importance. The SEC contested the paper, stating that a lack of confidence intervals and ambiguous results from other academic literature related to the manner was not affirmative enough for the SEC to accept whether CME is a market of significant size. Bitwise’s filing contains a price discovery analysis that includes confidence intervals, but it seems likely that the SEC will shed light on the ambiguous conclusions derived from the other academic papers – a spot-based U.S. ETF is unlikely to be approved in the near future.
- No filings sufficiently identify that wash trading and market manipulation on certain exchanges do not impact the market. Bitwise made a case for BTC’s unique resistance to manipulation while looking at wash trading related to their rejected 2019 filing.
- No filings have sufficiently illustrated that bitcoin is costly to manipulate.
- The SEC later points towards more unique “risks” associated with bitcoin. Some noteworthy risk remarks noted from the SEC: “hacking of the bitcoin network and trading platforms”, “malicious control of the bitcoin network” i.e. a 51% attack, “insider trading related concerns”, “manipulative activity involving “purported stablecoin” Tether”.
31 Jan 2022
Fidelity BTC ETF also rejectedSix down and more to come, as the SEC also rejected the Fidelity BTC ETF.
Source: Tradingview (Coinbase, GBTC, CME)
The SEC has denied all physically-backed U.S. BTC ETFs, most recently with Fidelity’s filing. All in all, it seems very likely that all upcoming filings will face the same destiny as Fidelity. With the current market structure of bitcoin, it will be near impossible to satisfy SEC’s stringent requirements. The SEC’s reasoning for the denials can be summarized with the following remarks:No filing proposals are sufficiently “designed to prevent fraudulent and manipulative acts and practices” and “to protect investors and the public interest”.