The SEC recently outlined concerns over potential Bitcoin price manipulation and fraud as reasons for delaying approval of Global X’s spot BTC ETF application. According to analyst WhaleWire, this likely foreshadows rejections for other pending spot Bitcoin ETFs like BlackRock’s.
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SEC Details Manipulation Concerns
In its filing delaying a decision on Global X’s spot Bitcoin ETF until January 2024, the SEC requested further feedback on concerns like susceptibility to manipulation and adequate transparency.
WhaleWire highlighted questions around whether the proposed ETF and shares would be vulnerable to manipulation. The SEC also wants views on if the proposal sufficiently prevents fraudulent acts, citing the need for surveillance-sharing agreements.
WhaleWire notes such concerns over potential manipulation formed the core rationale behind rejecting previous spot Bitcoin ETF applications over the years. With the same issues still unresolved, WhaleWire expects the SEC will deny Global X’s proposal in January 2024.
Implications for Other Applicants
Commenter Svetoslav Grigorov suggested manipulation concerns won’t affect BlackRock’s spot ETF bid. However, WhaleWire contends the same Bitcoin market issues apply across all applications.
Without addressing transparency and manipulation problems, WhaleWire believes BlackRock and other applicants will face rejections like Global X. The SEC wants strict mechanisms to prevent fraud and manipulation.
Uphill Battle Remains
While applicant arguments around Bitcoin’s resistance to manipulation have developed, the SEC still has significant doubts. Surveillance-sharing agreements with regulated Bitcoin markets are lacking.
Unless these core concerns are satisfied, WhaleWire thinks the SEC will continue denying spot Bitcoin ETFs as they have historically. With the same rationale weighing against BlackRock, approval remains an uphill battle.
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The SEC’s detailed questions suggest they will take a meticulous approach evaluating the latest crop of spot ETF applicants. While futures-based products exist, direct Bitcoin exposure via an ETF remains elusive for now. The coming years will determine if market changes can appease the SEC’s worries.
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