Does The Bitcoin ETFs Have An Impact On The Cryptocurrency Market?
The latest sell off experienced in the cryptocurrency exchange markets was heavily linked to the postponement of the decision to introduce Bitcoin ETFs by the Security Exchange Commission (SEC). The decision which was expected to be handed out earlier this month was postponed to September with experts predicting an even longer time period before Bitcoin ETFs are allowed in the market. Bitcoin, the pioneer of cryptocurrencies, saw its price plunge to below $6000 in the recent bearish run, representing over 20% loss in the last month alone after the rumors were confirmed.
On August 7th 2018 the SEC offered a decision to push its decision on the CBOE BZX exchange offering the electronic traded finds on Bitcoin to September 30th 2018. The decision is expected to take even longer to beyond 2019 before a final decision is reached.
However, with the cycle of regulation of the Bitcoin ETF never ending, should investors in Bitcoin and other crypto be worried about the future of the ETFs?According to one Twitter user who offered his opinion on the matter claimed that users should not be affected by the news emanating from the suspension of the decision by SEC. The actual purpose of ETFs is to service the overall blockchain legacy system and not the other way around.
“ETFs don’t matter. The fact that there are many approval processes involved in the approval shows the legitimacy of Bitcoin by itself. The ETFs are to keep the legacy systems relevant and not the other way round” – @coinjunky on Twitter
The Effect Of ETF’s On Bitcoin’s Price
The increasing focus on how these ETFs affect the price is a bit misguided. The decision to accept Bitcoin ETFs will not increase the price significantly after the rumors materialize to news. This is heavily affected by the already filled market of Bitcoin buyers who have held the coin waiting on the decision of the SEC. A positive announcement will cause these investors to sell off their positions which will limit the high rise in prices expected.
Bitcoin’s ETF offers an antithesis of the description of Bitcoin as it does not serve as a transaction asset and lacks the value derived from mining. The value of the ETF is derived from the people with equity accounts who aim to allocate a part of their wealth to Bitcoin via the ETF hoping for an increase in price. This is the old fool theory of expecting someone to buy the asset at a higher price once it surges.
The product itself will without doubt positively affect the price of Bitcoin once approved. To make it successful however, the SEC should ensure transparency and protection of investors in terms of custodial responsibilities. The ETF will have different regulations to the traditional assets ETFs and all this should be taken into account to offer efficiency and security to investor’s funds.