Why The Bitcoin ETF Project Failed

By Daniel Zo Bitcoin, ETF, USA, SEC

If you’ve been following recent digital currency news, then chances are that you already know that the Winklevoss-backed ETF Bitcoin securities project was blocked by the US corporate regulator, known by the name of the Securities and Exchange Commission.

This is quite understandable, considering the fact that economic analysts did mention that the chances for approval were fairly low, but thoroughly understanding the reasons is essential to make sure that the project doesn’t fail next time. To put things better into context, the following question should be asked: would you be tempted to invest into an asset that may be illegal now, or sometime in the future?

ETF Bitcoin

The question is quite interesting, given the fact that it does pose some truth- after all, bitcoin is illegal in some places, and the situation isn’t looking good in a couple of countries. Funny enough, the question also comes from the Winklevoss Bitcoin Trust, the financial entity that was trying to create the Bitcoin exchange-traded fund. In the prospectus for the project, there is a risk factors section, outlining the main risks that possible bitcoin ETF investors may expose themselves to. Some examples include investment hazards, such as market manipulation, changing to some of the trading regulations, hacking, fraud, sabotage, conflicts of interest, possible taxation of the digital currency and more. Not only this, but there is also another risk for investors, being that if listed, chances are that the bitcoin ETF securities will either trade at a lower, or higher price when compared to the digital currency’s value. Because of its high volatility, this can indeed pose several risks to investors.

Regardless of the risks associated with trading Bitcoin ETFs, the main reason why the SEC decided to issue a negative verdict was the following: bitcoin remains an unregulated investment and trading commodity, therefore the SEC is not prepared to take responsibility for opening bitcoin investment possibilities to small investors as well, if things are to go south.

Regardless of the negative verdict, in a recent press statement, Tyler Winklevoss, the chief financial officer of Digital Asset Services mentioned that they will remain optimistic, and will continue trying to bring Bitcoin ETFs on the market by collaborating with the SEC staff, and attempting to find more solutions.

For those who do not know, an approval of the Bitcoin ETF project, would mean that larger bitcoin investments would be open even to those who do not have a lot of capital to spare, thus transforming bitcoin into a practical asset, rather than a theoretical, which would only give out profits by increasing its value.

Based on everything that has been outlined so far, what do you personally think about the outcome of the Bitcoin ETF project? Let us know your thoughts in the comment section below.