[2018-08-06] Only a Matter of Time Before SEC Approves Bitcoin ETF: Tech VC

[moriskarlov]

The market is rapidly approaching the point of acceptance for a bitcoin ETF, and the Securities and Exchange Commission (SEC) will eventually approve an ETF in the near future. This is the opinion of Fatfish Internet Group CEO, Kin-Wai Lau, speaking to CNBC last week.

According to Lau, what the market is experiencing is a “second wave rally” for bitcoin and cryptourrencies, a strong wave of demand driven by institutional investment entry and adoption. This he said, is generally a positive sign for early adopters and people with an interest in the sector. Going further, he also stated that the likelihood of the SEC approving a crypto market ETF is more a function of what organisation will successfully convince the SEC that it has the necessary tools to float an ETF.

He said:

“I think it’s a matter of time before we see the SEC approve an ETF. It’s just a matter of which organisation will be able to come out with comprehensive tools in terms of monitoring, surveillance, and ability to liquidity. there is a range of tools that need to be equipped, but it’s also readiness of the market. We’re not far away, maybe a couple of months away from the market accepting an ETF product. I think that’s what the SEC will be looking at.”

In Lau’s opinion, boosted bitcoin demand is being driven primarily by organic demand from everyday people around the world – a pattern that he says will not change in the run-up to the end of the year.

Responding to a question about what markers investors should be on the lookout for in terms of predicting bitcoin price movements, Lau stated that adoption, and not ETFs or other ‘abstract’ market instruments is what will substantially impact the asset price.

See more - https://www.ccn.com/only-a-matter-of-time-before-sec-approves-bitcoin-etf-tech-vc/

[Lucius]

He just repeated what most people know, BTC ETF will be approved sooner or later, no doubt about it. With every new refusal from SEC we are actually a step closer to that goal, all bad in the current application is subject to change in the next. In the end there will be no more reason that SEC does not approve BTC ETF.

However in conclusion it is stated that ETF is not ultimate solution and something that will boost price, but that we need adoption and actually more common people who will start to use BTC. It is difficult to say how much will BTC ETF impact on the cryptocurrency market, but it is certain that this will be the simplest way for big investors to enter in this market. If we talk about physical ETF where shares need to be backed with real BTC, basic law of supply and demand should push price up - of course if there is an investor's interest to invest in BTC.

[NeuroticFish]

I think it’s a matter of time before we see the SEC approve an ETF.

Of course it is. It's also a matter of time until our sun becomes supernova.
I mean, it's a trial and error approach, the ETF requests become better and better, so indeed, at some point they'll be good enough. The market, in time, should become mature enough. And then yes, the ETF will be approved.

But the approach is wrong. People expect the ETF will rise the price (if possible, to the sky and beyond) and will make it also stable (lol!). Actually the commission seems to be expecting the market become mature and stable before accepting the ETF. So the other way around.

[Betwrong]

I think it’s a matter of time before we see the SEC approve an ETF.

Of course it is. It's also a matter of time until our sun becomes supernova.
I mean, it's a trial and error approach, the ETF requests become better and better, so indeed, at some point they'll be good enough. The market, in time, should become mature enough. And then yes, the ETF will be approved.

But the approach is wrong. People expect the ETF will rise the price (if possible, to the sky and beyond) and will make it also stable (lol!). Actually the commission seems to be expecting the market become mature and stable before accepting the ETF. So the other way around.

The market will hardly become stable in the nearest future because we are still in the early stage of adoption, and nothing can be stable at such stage. However, I think that Bitcoin ETF will be approved soon because there is a huge demand for that. And surely it's not just "a matter of time" in the sense you've mentioned. Imo it can be approved within a year, when a company (Winklevoss twins?) will come out with a proposition which SEC will not be able to dismiss.

[darkangel11]

He just repeated what most people know, BTC ETF will be approved sooner or later, no doubt about it. With every new refusal from SEC we are actually a step closer to that goal, all bad in the current application is subject to change in the next. In the end there will be no more reason that SEC does not approve BTC ETF.

Of course. That's because in each and every ruling the SEC is giving a vivid explanation. This explanation serves as a set of rules that says what has to be changed for an ETF to be approved. And they don't want a lot from the companies, just that they're big enough to handle everything, have good security and be insured. I believe that some of the current applicants already know what to do and will be approved in the next few months. I believe the maximum that they can delay it is 6 months, so get ready for February 2019

[gentlemand]

Of course. That's because in each and every ruling the SEC is giving a vivid explanation. This explanation serves as a set of rules that says what has to be changed for an ETF to be approved.

As far as I can tell the SEC is asking for something no one and nothing will ever, ever be able to supply - the complete taming of Bitcoin trading and stuffing in into the type of box they deal with with conventional markets.

It doesn't matter how 'inevitable' tech VCs think it is. The SEC is not a tech VC. They deal with the absolute opposite end of things. Urging it into existence because it would be super cool isn't going to cut it with them. They deal with things as they see them and they have no sentimental attachment to crypto or any reason to take needless risks.

[NeuroticFish]

Imo it can be approved within a year, when a company (Winklevoss twins?) will come out with a proposition which SEC will not be able to dismiss.

One year is a more than reasonable time frame, but I strongly believe that it's not what they meant. I believe that they meant this summer/autumn and that's why I reacted so.. harsh.
While I too love to see Bitcoin price rising, but somehow all this fuzz around the ETF gives to some unrealistic expectations. And then "bitcoin crashing" threads will follow with each dip, which is worse than this.

[Slow death]

The market is rapidly approaching the point of acceptance for a bitcoin ETF, and the Securities and Exchange Commission (SEC) will eventually approve an ETF in the near future. This is the opinion of Fatfish Internet Group CEO, Kin-Wai Lau, speaking to CNBC last week.

this should not be news because anyone knows this, what people want to know are the exact dates of when an ETF will be approved, now say that one day they can be approved so everyone already knows. I do not see why the hell this is news

According to Lau, what the market is experiencing is a “second wave rally” for bitcoin and cryptourrencies, a strong wave of demand driven by institutional investment entry and adoption.

Bitcoin (BTC)

Volume (24h): $4 333 394 666 USD

Where are institutional investors? the only thing I can think of is: people are selling their cryptos to buy bitcoin, just that ... I'm not seeing institutional investors. It's not hard to see that we have no demand.

[gentlemand]

this should not be news because anyone knows this, what people want to know are the exact dates of when an ETF will be approved, now say that one day they can be approved so everyone already knows. I do not see why the hell this is news

Can you lay out straightforward reasons why an ETF approval is a 100% certainty? I cannot find a single one anywhere in this solar system.

People need to stop thinking like moon kids, and put themselves in the minds of hardened decision markers with no emotional investment.

[darkangel11]

Of course. That's because in each and every ruling the SEC is giving a vivid explanation. This explanation serves as a set of rules that says what has to be changed for an ETF to be approved.

As far as I can tell the SEC is asking for something no one and nothing will ever, ever be able to supply - the complete taming of Bitcoin trading and stuffing in into the type of box they deal with with conventional markets.

It doesn't matter how 'inevitable' tech VCs think it is. The SEC is not a tech VC. They deal with the absolute opposite end of things. Urging it into existence because it would be super cool isn't going to cut it with them. They deal with things as they see them and they have no sentimental attachment to crypto or any reason to take needless risks.

THey aren't the ones taking the risk, the companies are. The sec wants the companies that are willing to take that risk to not be able to manipulate the market (this was one of the main things Winklevoss ETF did not cover) and have a history of running ETFs. Huge companies like VanEck are able to provide that and create a safe environment for their investors. If they're willing to take the risk SEC will have to agree, and that's not only my opinion but the people who are/were dealing with the SEC directly.

Where are institutional investors? the only thing I can think of is: people are selling their cryptos to buy bitcoin, just that ... I'm not seeing institutional investors. It's not hard to see that we have no demand.

If we had no demand, with 1800 new bitcoins being mined each day we'd be in a continuous bear market all year long. No bounces, no recoveries, just straight red all day, every day.

[gentlemand]

THey aren't the ones taking the risk, the companies are.

By approving it they are in effect rubber stamping Bitcoin in a way no other US government agency has so far. I'd call that sticking your neck out and institutions of this nature really do not do that very often.

And if people demand to know why they didn't pass it there are still plenty of things to point at as to why. The hold places like Bitmex and Bitfinex have over prices is reason enough, let alone others.

[Samarkand]

...
By approving it they are in effect rubber stamping Bitcoin in a way no other US government agency has so far. I'd call that sticking your neck out and institutions of this nature really do not do that very often.

And if people demand to know why they didn't pass it there are still plenty of things to point at as to why. The hold places like Bitmex and Bitfinex have over prices is reason enough, let alone others.

I completely agree with you that the SEC is not going to approve an ETF for the foreseeable future,
because even though a Bitcoin ETF would be an innovation, they are still obliged to follow
their mandate of consumer protection. However, I have serious doubts that the SEC officials
are even aware of the huge influence that places like BFX and BitMEX have on the BTC price.

Even many people on Bitcointalk are completely clueless about the fact that Bitfinex is mainly
responsible for the price action and most other exchanges simply follow the price action that originates
from there due to arbitrage. Therefore I have my doubts that some high-ranking SEC officials
are informed enough about the actual nature of the Bitcoin market to know about the influence
of these sketchy exchanges / bucket shops.

Just take a look at the recently appointed new "Associate Director of the Division of Corporation
Finance and Senior Advisor for Digital Assets and Innovation", Valerie Szczepanik.
She has been working for the SEC since 1997. Do you really think that she has a clue
about the influence and the dubious practices of BitMEX and BFX? Or any of the Korean
exchanges?

As I said I wholeheartedly agree with your conclusion, but I doubt the accuracy of the
second part of your post.

[gentlemand]

Do you really think that she has a clue about the influence and the dubious practices of BitMEX and BFX? Or any of the Korean
exchanges?

As I said I wholeheartedly agree with your conclusion, but I doubt the accuracy of the
second part of your post.

I would certainly hope so. It only takes about five minutes of googling to figure it out. People making decisions that reverberate down the decades had better be diligent about educating themselves.

[1Referee]

Where are institutional investors? the only thing I can think of is: people are selling their cryptos to buy bitcoin, just that ... I'm not seeing institutional investors. It's not hard to see that we have no demand.

Important point is that you aren't supposed to see institutional input.

You'll start seeing institutional input once they want you to see it, which is by the time they are comfortable enough to fully dive into it with their full name exposed.

I'm quite certain that various financial institutions and hedge funds are already somewhat throwing around with pocket change through proxies, but they obviously want to remain low-key and that for good reasons. In some cases they aren't even allowed to do what they do, which is why they use proxies in the first place.

Once these parties have set everything up in a legal manner with custody solutions, the brave institutions will follow afterwards. I would say it's reasonable to happen before the block halving in 2020.

[squatter]

Imo it can be approved within a year, when a company (Winklevoss twins?) will come out with a proposition which SEC will not be able to dismiss.

One year is a more than reasonable time frame

Is it? Some ETFs have taken multiple years for SEC approval. And that's for everyday run-of-the-mill commodities. Bitcoin represents a whole new class of assets that the SEC doesn't seem to know how to deal with.

So, I'd expect a Bitcoin ETF approval to take longer than any other ETF application process in history. A decade wouldn't even surprise me.

The other thing is, it's not just a matter of time. The SEC's objections regard structural issues in the market -- things like market manipulation and poor liquidity.

[BitHodler]

The other thing is, it's not just a matter of time. The SEC's objections regard structural issues in the market -- things like market manipulation and poor liquidity.

The same basically applies to futures. The majority of the volumes last year was being generated by unregulated exchanges, and is still the case today. The CFTC is even investigating a couple of exchanges as we speak.

The CFTC and the SEC might seem like completely different entities, but they share the exact same foundation to operate on. Can we say that the futures markets were part of a failed experiment?

[squatter]

The other thing is, it's not just a matter of time. The SEC's objections regard structural issues in the market -- things like market manipulation and poor liquidity.

The same basically applies to futures. The majority of the volumes last year was being generated by unregulated exchanges, and is still the case today. The CFTC is even investigating a couple of exchanges as we speak.

The difference is that entities like CBOE and CME could self-certify Bitcoin futures. They didn't need affirmative regulatory approval from the CFTC to launch those markets. ETF applicants do, however, so the SEC is in a position to drive a much harder line with them.

If the CFTC could have stopped them, they probably would have. A couple months later, they were holding hearings/meetings to examine whether the self-certification process was adequate -- obviously because of BTC futures launching.

The CFTC and the SEC might seem like completely different entities, but they share the exact same foundation to operate on. Can we say that the futures markets were part of a failed experiment?

Were they? Why?

[Samarkand]

...

The CFTC and the SEC might seem like completely different entities, but they share the exact same foundation to operate on. Can we say that the futures markets were part of a failed experiment?

Were they? Why?

I assume that he is referring to the gradual decline in trading volume of the BTC futures.

One article that details the loss of interest in the BTC futures:
https://www.derivativesandreporeport.com/2018/05/bitcoin-futures-volatility-and-total-volume-since-the-start-of-2018/

According to recent data provided by CBOE and CME Group, the volatility and total volume of bitcoin futures
in 2018 have been in a gradual decline.

Of course there have been a few volume spikes here and there, but investors haven´t
exactly been jumping on the opportunity to trade these BTC futures.

Let´s take a look at the CME futures volume right now:
-Aug 2018 = 3580 traded contracts
-Sep 2018 = 15 traded contracts
-Oct 2018 = 0 traded contracts
-Dec 2018 = 3 traded contracts

This doesn´t look particularly promising if you ask me. At some
point they might even consider to ditch the futures altogether if the
volume doesn´t pick up in the next years.

[1Referee]

Of course there have been a few volume spikes here and there, but investors haven´t
exactly been jumping on the opportunity to trade these BTC futures.

Let´s take a look at the CME futures volume right now:
-Aug 2018 = 3580 traded contracts
-Sep 2018 = 15 traded contracts
-Oct 2018 = 0 traded contracts
-Dec 2018 = 3 traded contracts

This doesn´t look particularly promising if you ask me. At some
point they might even consider to ditch the futures altogether if the
volume doesn´t pick up in the next years.

CME's volumes aren't that bad at all. CME's volume for AUG 2018 today is 4900 contracts, which means 24,500BTC = $159 million.

Top exchanges by volume;

Binance; $336 million USDT.
OKEx; $227 million USDT.
Bitfinex; $196 million USD/USDT (never know the ratio since they count everything as one).
CME; $159 million USD.

The first true USD exchange is Bitstamp with $65 million in volume.

If you discard everything else, you'll see that CME is probably the largest exchange measured by its actual USD cash settlement value.

[squatter]

...

The CFTC and the SEC might seem like completely different entities, but they share the exact same foundation to operate on. Can we say that the futures markets were part of a failed experiment?

Were they? Why?

I assume that he is referring to the gradual decline in trading volume of the BTC futures.

One article that details the loss of interest in the BTC futures:
https://www.derivativesandreporeport.com/2018/05/bitcoin-futures-volatility-and-total-volume-since-the-start-of-2018/

Okay, that's fair enough. Although I notice that trading volumes at Bitstamp and Bitfinex declined throughout the year as well. I think that's probably natural following a run-up like 2017. The hype ends and speculators become disinterested.

CME's volumes aren't that bad at all. CME's volume for AUG 2018 today is 4900 contracts, which means 24,500BTC = $159 million.

Top exchanges by volume;

Binance; $336 million USDT.
OKEx; $227 million USDT.
Bitfinex; $196 million USD/USDT (never know the ratio since they count everything as one).
CME; $159 million USD.

The first true USD exchange is Bitstamp with $65 million in volume.

If you discard everything else, you'll see that CME is probably the largest exchange measured by its actual USD cash settlement value.

Thanks. That definitely gives some perspective.