Regulators Looking To Approve A Bitcoin ETF Will Be Critical After Massive Volatility In June
If you were an investor in Bitcoin, last month’s meteoric rise in value should have come off as a pleasant surprise to you. Although investors were not the only ones looking at the space closely. Regulators are looking at it too and it seems like they have a case against approving Bitcoin ETFs.
Regarding the crypto market’s wild ride in the last week of June, chief investment officer at Arcam Jeff Dorman said:
“Bitcoin finished this week exactly where it started, but the path taken was volatile. On Monday Bitcoin was well on its way to achieving year-to-date highs, by week end, however, it somewhat mercifully rested at $11,000. In fact, it was so volatile that the high-to-low drop was a staggering 25% in a 24-hour span. This kind of volatility makes it easy to lose sight of the market.”
Volatility has been the main reason for Bitcoin ETF proposals getting shot down by the SEC. When SEC Chairman John Clayton was asked whether an ETF based on a bundle of cryptocurrencies could be released in the U.S., Clayton said that the SEC is currently working on making that possible. He cited custody being the chief reason for ETFs not getting approved. Additionally, another major concern for the SEC is the alleged absence of robust preventative measures for market manipulation. He said:
“We have sophisticated rules and surveillance to ensure that people are not manipulating the stock market, those cryptocurrency markets by large do not have that; And we’re working hard to see if we can get there, but I’m not just going to flip a switch and say this is just like stocks and bonds, because it’s not.”
Dorman additionally talked about the synthetic volatility caused by unnecessary leverage and outsized risk-taking. He added:
“It’s almost a slam dunk now that an ETF won’t be approved any time soon, as an 81% 14-day levered rally, most of which occurred after U.S. trading hours, is not exactly the formula for successful SEC approval.”