On July 26, the US Securities and Exchange Commission (SEC) officially rejected the Bitcoin exchange-traded fund (ETF) application filed by the Winklevoss twins, citing lack of measures in the ETF to prevent price manipulation.
“The Commission addresses each of these arguments below. In Section III.B, the Commission addresses BZX’s assertion that bitcoin and bitcoin markets, including the Gemini Exchange, are uniquely resistant to manipulation and finds that the record before the Commission does not support such a conclusion.”
The SEC further emphasized that the proposed ETF by the Winklevoss twins, who oversee a major US crypto exchange known as Gemini, does not have sufficient tools to identify and deter fraud and manipulation that could impose a negative impact on the price movement of Bitcoin.
Almost immediately after the release of the SEC’s statement, SEC commissioner Hester Peirce expressed her disappointment with the decision of the agency to reject the bitcoin ETF filed by the Winklevoss twins, noting that Bitcoin, as an asset, is regulated and matured enough to be worthy of US markets.
“Apparently, bitcoin is not ripe enough, respectable enough, or regulated enough to be worthy of our markets,” Peirce said in a personal statement, referring to an official public statement she published to refute the disapproval of the Winklevoss Bitcoin ETF.
Peirce added that the premature decision of the SEC undermined investor protection by dismissing the institutionalization of the Bitcoin market, which has seen an increase of adoption by regulated financial institutions such as Goldman Sachs, JPMorgan and Morgan Stanley over the past several months.
“In addition, I am concerned that the Commission’s approach undermines investor protection by precluding greater institutionalization of the bitcoin market. More institutional participation would ameliorate many of the Commission’s concerns with the bitcoin market that underlie its disapproval order,” Peirce said.
Despite the optimistic comments of SEC commissioner Peirce, the price of Bitcoin dropped by more than 4% within a one-hour period, from $8,315 to $7,930, heavily affected by the rejection of the Winklevoss Bitcoin ETF.
Over the past week, Bitcoin and the rest of the cryptocurrency market had experienced a strong rally supported by a spike in volume. Within two days, between July 25 and 26, the volume of Bitcoin surged from $3 billion to $6.3 billion according to the market data provided by CryptoCompare, suggesting an increase in demand from investors in the public market towards Bitcoin.
Analysts have generally attributed the climb of the Bitcoin price to the anticipation around the approval of the Bitcoin ETF filed by the Chicago Board Options Exchange (Cboe), but the disapproval of the Winklevoss Bitcoin ETF has led a portion of the cryptocurrency community to reevaluate the probability of the approval of the Cboe ETF.
In its statement, the SEC emphasized that the commission disapproved the filing of the Winklevoss twins because their ETF was not able to meet the requirements of the SEC, and it had an issue with the involvement of Gemini in the process of establishing the value of the Bitcoin ETF.
Hence is possible, given the enthusiastic stance projected by commissioner Peirce, that the Cboe ETF will get approved in the near future, especially if it successfully covers the issues the SEC had with previous Bitcoin ETFs.