Cboe’s Bitcoin ETF “Will Not Be Approved” by SEC According to Digital Asset Investment Firm
Bitcoin ETF “Will Not Be Approved” According to Investment Firm
The Cboe bitcoin ETF has been generating excitement in the crypto community all summer – even as the decision on the ETF was delayed in early August. Some people claim the bitcoin ETF has a “99% chance” of being approved. Others, however, claim the ETF will not be approved.
In an interview with Blokt.com, a licensed digital asset investment firm claimed the bitcoin ETF will not be approved. Bryan Courchesne, the managing director of Digital Asset Investment Management, claims the SEC will not approve the ETF “due to their concerns over manipulation in the underlying bitcoin market.”
The Cboe SolidX VanEck bitcoin ETF has had a rocky few months. Since being posted to the Federal Register by the SEC earlier this summer, the ETF has been delayed once. The SEC had until August 10 to approve, deny, or delay the ETF, and they chose to delay the decision. Now, they have until September 30 to once again approve, deny, or delay the ETF. If they choose to delay the ETF in September, then the SEC has until February to approve or deny the ETF. Beyond February 2019, the SEC can delay the ETF decision no longer: they have to approve or deny the ETF by February 2019.
Some sources in the crypto community claim the SEC will almost certainly approve the bitcoin ETF. However, these sources also indicate that the SEC will use the full timeframe given to them. Based on that information, we can expect the Cboe bitcoin ETF to be approved around February 2018.
Courchesne, however, disagrees.
Courchesne claims that the SEC believes bitcoin markets are too manipulated. The SEC will deny the bitcoin ETF because of this perceived manipulation.
The SEC wants to protect retail investors. Retail investors can get burned in a market with price manipulation. Of course, the Cboe bitcoin ETF was priced intentionally to avoid retail investors. The ETF is priced at $200,000 per share, which would make it only an option for accredited investors and institutional investors. VanEck and SolidX – the team behind the Cboe bitcoin ETF – did this to ensure that the SEC couldn’t deny the ETF to protect retail investors.
There are few securities with a share price of $200,000. The only other notable example of Berkshire Hathaway, which trades on the New York Stock Exchange at a current price of around $313,000. Retail investors only account for around 10% of all Berkshire Hathaway owners, with institutions owning most of the remaining shares.
Cboe is expecting to attract a similar market for its bitcoin ETF: mostly institutional investors like hedge funds.
The Cboe bitcoin ETF might not be permanently priced at $200,000 a share. In the future, the organization could split the shares once the market becomes safer for retail investors.
There’s evidence that Cboe is already preparing for a share split. Courchesne, in his interview with Blokt.com, revealed a crucial piece of information from the Cboe bitcoin ETF filing:
“Courchesne discovered that Cboe has mentioned a share price of 0.025 BTC in their filing. This could be the writing on the wall that they would plan an eventual split of the shares.”
Here’s how the filing describes it:
“Whether the Shares are priced equal to 25 bitcoin with a Basket of 5 Shares or the Shares are priced equal to .025 bitcoin with a Basket of 5,000 Shares, the cost to an AP to create or redeem will be the exact same.”
Today, 0.025 BTC is worth about $160 USD. That share price is obviously much more palatable for retail investors.
Typically, an ETF will outline the rules for the possibility of a share split before trading goes live. If the Cboe bitcoin ETF is approved, then we may get rules of a share split shortly before it hits the market.
ETF Approval is “Unlikely”
Ultimately, Courchesne feels all of the points above are moot because the bitcoin ETF is unlikely to be approved.
Courchesne acknowledges that other sources online have indicated the opposite and claimed that bitcoin ETF approval is a 99% certainty. However, Courchesne takes issue with these sources because they’re unnamed and anonymous. For all we know, the websites are just making up quotes from fictitious sources.
“I think the ETF does not get approved. One of the reasons the Winklevoss ETF was denied was because of the SEC’s concern over manipulation in the underlying market. Nothing has changed in the space to curtail that and it is tough to prove that bitcoin markets are resistant to manipulation.”
Ultimately, the deadline for ETF approval is approaching quickly. It seems likely that the SEC will delay the decision again in September, although this new report suggests that the SEC will deny the Cboe bitcoin ETF – and they could do it as soon as September.