Wow.
From the ruling....
> First, the exchange must have surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity. And second, those markets must be regulated.
> Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated. I'm not sure I entirely understand if they mean that Bitcoin itself must be regulated or just that the SEC needs to see that the major exchanges are regulated.
If its the former, then I think this is game over, if its the later then............hmmm I really don't know.
EDIT Having gone through the ruling it looks like they have a few reservations.
1) Most of the bitcoin trading happens on unregulated markets
2) Most of the volume happends in China and not the us and is therefore hard to regulate.
3) The ETF is tied to the Winklevoss own Gemini exchange which has little volume and often inferior pricing to other more liquid exchanges.
4) They bring up the lack of a liquid futures market, though I'm not sure this is really a concern.
> The Commission has, in past approvals of commodity-trust ETPs, emphasized the importance of surveillance-sharing agreements between the national securities exchange listing and trading the ETP, and significant markets relating to the underlying asset. 144 Such agreements, which are a necessary tool to enable the ETP-listing exchange to detect and deter manipulative conduct, enable the exchange to meet its obligation under Section 6(b)(5) of the Exchange Act to have rules that are designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest
So until bitcoin markets are regulated by the SEC or similar no ETP/ETF products I suppose.
I'm a bit disappointed that there is no ETF but this is pretty darn reasonable.
That is a loss of 25% of its value. This announcement does nothing to hurt the utility of Bitcoin or its application as a medium of exchange. That drop certainly seems like a speculative investment bubble popping.
That's what the 1MB blocksize limit is for.
Update as of 11 March 01:44 UTC (4h43m after the SEC decision): BTC fully recovered!
It now stands at $1140, which is the level it was trading at just 2 days ago. From 09 March 00:00 UTC to the SEC decision on 10 March 21:01 UTC it gained +12% due purely to speculation ($1140 to $1280) and basically retraced these 12%: http://bitcoincharts.com/charts/bitstampUSD#rg10zig30-minzcz... I am impressed. I thought downward trading pressure would have lasted for days/weeks after the SEC rejection.
The volume this week is actually down. It is only a handful of people trying to intentionally spike the price, and trade off the news to turn a daily profit. The only suckers are other day traders, and hodlers actually suckered some of them by buying in the dip they created.
weekly volume: https://data.bitcoinity.org/markets/volume/30d?c=e&r=week&t=...
If a handful of people trying to spike the price and trade off the news can cause BTC-USD to be 30% more than what it "should" be (i.e., what the price would be in a high-information, high-liquidity, low-shenanigans market), then the SEC is absolutely correct to say that the ETF is too wild to be approvable at present.
For comparison, on June 24 (Brexit), GBP-USD fell from about $1.50 to about $1.35, a 10% drop, and that was (IMO) much more significant news about the long-term future of the pound.
It could be coincidental, but I've always been suspicious that the Winklevoss twins were the first people of a mind and with the capital to start gaming the BTC market as one can any other financial institution.
The Winklevii are not people I'd like to distantly do business with.
Edit: I'm trying to find articles but it was years ago. What I recall were cycles of Ramps and Bear Raids. https://en.wikipedia.org/wiki/Market_manipulation
Cryptocoin markets are a haven for scams and manipulations. When I was into it I was hearing of a new scam almost every week. I don't think there is any correlation with Winklevoss let alone causation. Unless you have some evidence or references to present?
Citation? Not disagreeing - I have no knowledge either way, but this is about as useless a statement as one can imagine without backup.
So that's not likely not gonna happen ever. The ruling kills any other bitcoin/virtual asset ETF from getting approved as well.
So we're going to have competition in exchanges, a free market of them with various rules/surveillance levels? Neat!
Unfortunately for them, the SEC, quite reasonably, requires more than one regulated market to exist for the underlying commodity, and probably preferably not owned by the company behind the ETF itself. Seems obvious in retrospect.
Then some proper options would be nice. Preferrably someone who doesn't trade against their own customers, which at least one exchange is open about. There's a lot that could be done in the Bitcoin ecosysten (well, at least we are rid of MtGox).
1. A governing body that can create rules and regulation for the market.
2. An enforcement body that can enact penalties for rule violations.
The problem I think is not so much the governing agency, it's the enforcement for rule violators. It's one thing to punish Mt. Gox for violating the exchange terms, but what if it's some shady anonymous bitcoin exchange broker in China?
It means commodity exchanges dealing in Bitcoin regulated by the CFTC or similar entities in other jurisdictions. There are some already, but they do a very small share of Bitcoin volume.
> Coinbase has KYC, banking relationships and tax integration, I'm sure that can be extended to an exchange.
That's money transmitter stuff, which is a different set of regulatory requirements.
And do it in all the major jurisdictions?
This is partly why SEC wants underlying to be regulated.
You can trade the OTC product with ticker GBTC [1]. It is a sponsored note - has quite a bit of volume on OTC markets. AUM is about 230mm. Expense ratio is around 2% (atrocious).
I noted that - before bitcoins drop on Friday afternoon - GBTC was up about 135% over 2 years - versus bitcoins 200% appreciation. So the tracking error is quite bad.
I'd challenge ANY government to regulate cold, hard, cash
The SEC has a three pronged mission:
- Protect investors - Maintain fair, orderly, and efficiently markets - Facilitate capital formation
With this decision they missed on all three. No investor was protected. The BTC market today was not fair, orderly, or efficient. There was excessive capital destruction.
Registration means you're complying with certain laws. Those laws, in turn, make diligence easier for investors. If you remove those baseline expectations, marginal transaction costs go up.
Positive interest rates would be bad by the same logic
Bitcoin investors are not like this; they are holding onto the money in hopes the value goes up. The bitcoins they are holding are not being used for any financial transactions. Those bitcoins are essentially out of the economy while they are being held. This is bad for an economy, when the currency is more valuable as an investment than as a vehicle for economic transactions.
Ideally it should be both.
> This means that the only real reason to spend Bitcoin or otherwise use it as a payment is for situations where that's the only option and right now, and for the foreseeable future, that means assorted illegal or at best borderline illegal products
There are plenty of legal products you can buy.
> Perhaps a blockchain-based cryptocurrency might in the future resolve these issues, but otherwise it's a doomed product that I wouldn't put a single penny (or watt of household electricity) into.
The only real issue you're pointing out is the finite supply (volatility will sort itself out in time) which for example Monero answers with a "tail emission" meaning there is an ever increasing amount of coins.
Bitcoin's biggest use case is as an emergency fund. People in Venezuela who bought at $1200 in 2013 were still doing comparatively well when the price was $200.
If oppressive capital controls crack down in a nation like Turkey, Bitcoin can protect you.
Bitcoin is excellent for protecting yourself during financial emergencies. High volatility is acceptable in these situations. Some money is better than no money at all.
So then here's the controversy of your statement - if bitcoin is a deflationary appreciation-only thing - then maybe it's not as volatile as you claim and is fit to be used in EFT scenarios? Or if it is in fact volatile then maybe it's not all that deflationary in that it's value isn't bound to be going up indefinitely?
Which is it? :)
As a side note - yes, the mechanics of coin mining do make bitcoin "technically" deflationary, but just like any other "thing of value" this doesn't guarantee it's value in the "real world" to be mapped to that deflation 1-to-1. There's a finite supply of gold or oil out there for example - their prices however are bound to fluctuate quite a bit...
I suppose gold does get used for something.
Gold is probably a better store of value than bitcoin. It's not a great one, mind you (the price is still too volatile). Its security can also be assured with physical protections that are easier for a layman to understand than bitcoin's electronic protections. Bitcoin has a small but nonzero chance of a total collapse in its value which gold will not face until widespread exploitation of asteroid-based mineral resources is commonplace.
Neither are effective units of account.
Is there a more serious thing than Coinbase that exists?
What a lovely shade of red, it really matches the charts!
If you want to have a lot more rich data that forms the data-points, and you can download :
You can also use telnet to watch the price via:
telnet ticker.bitcointicker.co 10080The biggest benefit I can think of is that some institutional investors have restrictions on the types of securities that they can buy.
Someone could solve this by creating a company to buy lots of bitcoin, and then having an IPO to list that company on a public market. Then pension funds would be allowed to buy it, Jane Doe could buy some in her IRA, etc.
Any reason this wouldn't be just as good as an ETF?
You're repeating yourself. That is more or less what an ETF is.
Those restrictions exist for a reason. Trading unregistered things over-the-counter, e.g. private stock or Bitcoin, carries unique risks. One of those is around fraud. Most investment funds aren't equipped to do fraud diligence (and benefit from not having to do it on ETPs).
The expected benefit is that the Winklevoss twins can now cash-out the $11m+ of Bitcoins [1] on the backs of public sucke-... I mean investors.
There's not really any other immediate purpose for this ETF other than that, they've been working to build trust (a currency's only source of value) in Bitcoin for years now in order to add value to their own holdings; they will likely continue to resubmit the proposal [2] until they figure out a way to weasel things through. An ETF would be the ultimate stamp of trust and approval -- having the US gov't essentially validate Bitcoin via SEC approval means that $11m could easily turn into half a billion or more.
[1] https://www.washingtonpost.com/news/the-switch/wp/2013/11/09...
[2] https://www.forbes.com/sites/laurashin/2017/03/10/sec-reject...
It was a way for the Winkelvii to do a big Bitcoin dump without crashing the price. That's all, really.
Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated."
Note that the CFTC, which regulates commodities futures trading, is (or was?) considering regulating digital currencies:
https://en.wikipedia.org/wiki/Commodity_Futures_Trading_Comm...
However, it doesn't seem like they've come to a decision yet.
> The Winklevoss ETF proposal was rejected because the SEC found that the significant markets for Bitcoin tend to be unregulated overseas markets that are potentially subject to price manipulation. But this creates a chicken and egg problem. How do we develop well-capitalized and regulated markets in the U.S. and Europe if financial innovators aren’t allowed to bring products to market that grow domestic demand for digital currencies like Bitcoin?
If the key driver for domestic demand for the commodity is readable derivatives such that one needs to create such in order to drive demand, then, well, too bad.
If there is sufficient inherent utility in the underlying commodity, you won't need to violate normal exchange criteria to create derivative markets to stimulate demand for the commodity, the commodity will drive itself, and create the conditions where it won't be unduly onerous to create derivatives markets that meet the normal criteria.
As bitcoin exists right now that's not the case of course. Bitcoin is now a mostly speculative asset since the amount of transactions you can do is extremely small compared to the market value of bitcoin at the moment.
1) A much better number to use is 4,500/10 minutes, because if the transactions aren't used in a prior second, they can still be used in the next.
2) One-way ratcheting timelocked channels (these payment channels work kind of like a giftcard) are ridiculously easy to implement -- basically just use this scriptPubKey: ``` OP_IF <Bob's public key> OP_CHECKSIGVERIFY OP_ELSE <now+8 days> OP_CHECKLOCKTIMEVERIFY OP_DROP OP_ENDIF <Alice's public key> OP_CHECKSIG ```(from https://21.co/learn/intro-to-micropayment-channels/) These only require two transactions total to send many transactions from Alice to Bob. Even as technologies like Lighting Network are further developed, which make these channels full duplex, institutions looking to get high volume trustless transactions through should have very little challenge adopting simpler channels now.
3) The number of transactions is completely separate from the amounts that can be transacted. Large value transactions move through bitcoin as easily as small, so even if the number of transactions were bottle-necked, this is still very useful for settling larger amounts with finality.
We'll see how long the dead cat lasts.
See you at $600.
Like if the internet got broken up, Bitcoin would be even harder to use safely.
https://bitcoinity.org/markets/bitstamp/USD
Same place it was three days ago. You could have made a lot of money if you had followed your instincts.
Or you could have lost it all.
There is an OTC fund that holds Bitcoin...but at a large premium to NAV
A choice quote from elsewhere on the Internet: "Write call spreads, collect $$$ when they expire... this worthless stock is a goldmine!"
I have no words.
All of the popular volatility ETFs/ETNs are traded according to SEC regulation.
> which have lost 99.999% of their value
Did you read the prospectus? Leverage isn't free. This is by design.
And instead of rare earth metals, lets say it's iron? Something that is mineable almost anywhere, kind of like bitcoin. So you would have exchanges with these agreements, but you would also have exchanges without the agreements.
Miners need income, because mining is actively expensive. In the long term, this means they have to mine on the chain with the most valuable block reward. This means the economy really gets to decide the longest chain, not the miners.
But the ETF likely would have been large enough to tip the scales. Miners can stomach 48 hours of loss to push an agenda.
And it's probably not good to have such a huge portion of the economy in one place anyway. An ETF will make more sense when bitcoin has more maturity.
function generateBitcoinNewsReaction(oldPrice, newPrice) {
if (oldPrice > newPrice) {
return "This is good for bitcoin.";
} else if (oldPrice < newPrice) {
return "This is good for bitcoin.";
} else {
return "The price is stabilizing; this is good for bitcoin.";
}
} function generateBitcoinSkepticism(oldPrice, newPrice) {
if (oldPrice > newPrice) {
return "It was a bubble all along.";
} else if (oldPrice < newPrice) {
return "Deflationary currencies can't work";
} else {
return "The market cap is too low to support a stable currency";
}
}US 401k / IRA accounts can, and do, buy stocks in a variety of markets, whether directly or through instruments such as NYSEARCA:VEU (also available as the mutual funds VFWAX and VFWIX.) I'm not aware of any special reason why foreign-traded ETFs would get special treatment that foreign-traded stocks don't?
The ETF has been the talk of the town for the last four years, and it is not unreasonable to think that it has been holding the hand under the price, since to a lot of people it represented the coveted inflow of institutional investment into bitcoin.
With this gone, the immediate outlook for bitcoin is bleak. There is little market adoption to speak of, in fact bitcoin is probably losing market share, as the initial hype and attention grabbing announcements of bitcoin support have died down, and a lot of merchants have decided that the miniscule business it drives is not worth the trouble. Also, the network is straining even under the current load, leading to (much) longer transaction confirmation times and higher fees. The average fee for a bitcoin transaction is now almost one dollar - this rules out a lot of use cases that previously people would have said were ideal for bitcoin.
Which leads me to the even bigger problem: The bitcoin community and ecosystem is in a massive deadlock, between two sides that are equally rabid and antagonistic, and dividing the project down the middle, between the developers and the mining operators. Few outsiders likely know how bad it has become, but visit r/bitcoin and r/btc on reddit if you're curious. This would be concerning in itself for the future of the project, but it also means that right now no major updates can be made to the bitcoin network, because each camp runs a big percentage of the network and block any new initiative from the other side.
All of this makes me very bearish for bitcoin in the medium term. I am very sure that bitcoin has a future, but how long out that is, and how big it is, remains doubtful and could well be influenced negatively by particularly the issue of governance. Satoshi once said something like "in ten years bitcoin is either worth a huge amount or nothing". I'm starting to fear that might not be true - bitcoin could also become a small niche platform for a very limited set of use cases.
I would say coveted inflow of retail investment. I don't think any serious institution would invest in bitcoin. The risk is too high given that the AUM can go to 0 instantly with one data breach.
The transaction backlog is so high because people are using bitcoin more than ever, alot of times to get to those other cryptos
That doesn't mean it's their biggest concern; regulatory entities (and courts) tend to focus on criteria that meet those qualifications over other because they produce decisions which don't require creation of substantial new rules/precedent, and are more difficult to challenge.
As a lay-person I've come to expect convoluted legalese as found in contract terms, but where those are typically designed to bamboozle and obfuscate, or at least keep corporate lawyers employed decoding and negotiating each others writing, judgements and rulings are designed with the opposite goal in mind. If you are potentially creating case-law, it better be clear what you have decided and why.
[1] http://law.justia.com/cases/federal/appellate-courts/ca9/13-...
There's also the minor fact that a significant chunk of wallstreet already treats most of the bitcoin markets like commodity exchanges anyway. A significant driver of the massive instability in the bitcoin market is directly attributable to wallstreet treating bitcoin as a commodity. One possible upside of having an actual commodity exchange is that it might have helped stabilize some of that by decoupling the speculation from the actual bitcoin market a little, but I guess we'll never know at this point.
It's basically a wrapper class that lets people interact with things as if they were stocks.
There's no way this is going to gain mass adoption by being this expensive.
More importantly, this signals strong government regulation in the bitcoin and cryptocoin industry in general. I wouldn't be surprised if we started seeing security laws being applied retroactively to all the scams like initial coin offering (like IPO but unregulated and heavily manipulated) on Bitcoin and Ethereum.
To the wary trend watcher, this is exactly what VC's feared and noted by the significant decline in VC investment in blockchain and cryptocurrency startups.
I struggle to understand what you mean. What sort of anchor are you using for how much the exchange rate should be for adoption? Cost of electricity, cost of mining equipment, cost of running a node? Satoshis are so abstract that "this expensive" seems irrelevant to everything except for historical rates.
Conventional wisdom on BTC is that one element that would improve adoption would be lower volatility and that in order to get that, the market cap would need to be much, much higher. Given the fixed inflation rate this usually suggests that the exchange rate has to be correspondingly higher.
gravity is strong here
The usuall ETFs are baskets of bonds, stocks and commodities. Regardless of the level of volatility, they are all priced per the capacity of those stocks/bonds/commodities to create economical value. That means you have a solid economical logic to price them. Of course, supply and demand impacts the price, but even if no one wants to buy a certain stock, that stock has a marketable value. You can take the assets of that company, sell them and divine the cash by the number of stocks out there. Without going to too much details, I fail to understand how bitcoin can be treated like a stock/bond/commodities? Bitcoin value is purely based on the supply and demand forces. Without supply and demand, bitcoin has no value. On its own, it has no value generation power and therefore cannot be compared or traded like a stock, neither can be packaged into an ETF.
As much as I do not like to agree with SEC, this one is a right decesion!
> And second, those markets must be regulated.
So, essentially: bitcoin does not and can not satisfy these two conditions (nor can any other such scheme) and therefore you can't trade anything that is directly or indirectly representing bitcoins.
Checked Coinbase right about 30 minutes after it cratered down to 995. Text price alerts don't seem to be working :/
>"The Commission, pursuant to Section 19(b)(2) of the Act,9 designates March 30, 2017 as the date by which the Commission should either approve or disapprove the proposed rule change."
https://news.bitcoin.com/sec-delays-decision-solidx-bitcoin-...
Bitcoin is a means of transferring wealth. It is a tool, not a commodity. When are people going to stop this speculation and treat it as such?
ha ha ha, now china gets all the exchange data, morons