Bitcoin has rallied this year after a prolonged winter and has surged from around $3,700 in January 2019 to touch the $8,000 price point twice this month. The rising price trend, which many attribute to a host of reasons, including increasing Bitcoin network activity, rising trading volumes, the Tether scandal and increasing institutional interest, is now looking towards the upcoming ETF decision by the U.S. Securities and Exchange Commission (SEC), due tomorrow, May 21, 2019.

What will happen if the SEC approves the VanEck Bitcoin ETF?

The reason why there is so much hype around a Bitcoin ETF is that it is expected to truly open the gates for institutional investors, who are already quite keen on crypto investments.

Currently, institutional investors are wary of the many hurdles in direct crypto investments, including the use of unregulated, unreliable crypto exchanges and the management of crypto wallets, which, if compromised, can result in the complete loss of all funds.

Since an ETF tracks the price of the underlying asset (which in this case will be Bitcoin), investors will not have to concern themselves with the actual trading and custody of Bitcoin, and can simply leverage price movements.

All of this means that if the SEC approves the VanEck Bitcoin ETF proposal, which is currently under consideration, a large majority of investors will be able to simply invest in Bitcoin from their existing, institutional-grade platforms. Such a move will not only further legitimize Bitcoin as a digital asset but also promote significant price appreciation as the market matures.

Reasons to be optimistic

Earlier, the SEC had delayed and rejected ETF proposals, mainly because of concerns around price discovery and manipulation. Given how most exchanges are unreliable in terms of the accuracy of their trading volumes, the resulting data feeds and price measurements are believed to be inaccurate and prone to manipulation.

Things have however changed recently, with exchanges becoming much more transparent in terms of providing trading data, and we recently saw Bakkt, a major project backed by the Intercontinental Exchange, make progress in this regard by acquiring a crypto custody company and seeking licenses to be able to deliver physically settled Bitcoin futures contracts.

The service will promote price formation which will be “supported by proven tools to detect abusive or disruptive trading practices, including wash trades”, and is likely to encourage a positive view from regulators.

Moreover, the SEC was considering two ETF proposals, one by Bitwise and NYSE Arca and the other by VanEck-SolidX, submitted by the CBOE – however, the regulator decided to delay its verdict on the Bitwise proposal last week, but did not comment on the VanEck proposal, which is due for a decision tomorrow.

Even though the SEC can also delay this decision tomorrow, the fact that it did not announce a delay for both ETFs together has given the community reason to be optimistic.

What if the ETF proposal is not approved?

If the SEC delays or outright reject the ETF proposal tomorrow, we can expect Bitcoin price to take a bit of a hit, and the market sentiment will be hurt. However, a delay is more likely than a rejection, as the SEC has in the past expressed its willingness to consider a Bitcoin ETF on its merits, without prejudice.

Either way, the decision is expected tomorrow, and we expect the Bitcoin price to be range-bound until then.


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