• The Securities and Exchange Commission has published a report by Bitwise on the Bitcoin Exchange Traded Fund (ETF) application.
• In the document, Bitwise lists three key factors why the SEC should approve Bitwise’s Bitcoin ETF.

As CNF reported earlier, VanEck and SolidX have again withdrawn their Bitcoin ETF application. The SEC has two other requests pending, one of which is Bitwise’s Bitcoin ETF request. The company has been combative and has published a new report listing three reasons why the time has come to approve Bitwise’s Bitcoin ETF.

The report was originally presented a week ago to SEC Commissioners Robert Jackson, Hester Peirce and Elad Roisman. Now the regulator has made the document available to the public. In the 31-page report, Bitwise argues that when looking at the current Bitcoin market, there is a solid basis for a fully regulated Bitcoin ETF in the US. Bitwise further states that the “market has improved significantly over the past two years”.

Bitwise highlights the following key factors for a mature Bitcoin market:

1. The Bitcoin spot market has become efficient.
2. Bitcoin custody is increasingly taken over by regulated institutions.
3. The regulated derivatives market has gained in importance.

The reasons for a Bitcoin ETF in detail

For the first argument, Bitwise argues that the average price deviation of the 10 real spot bitcoin exchanges has decreased sharply over the last two years. While an average price deviation of over 0.8 percent was still measured in December, this was significantly below 0.1 percent in August 2019.

Since there have also been a large number of hacks of crypto currency exchanges in the past two years, for example even Binance was the victim of a 7,000 BTC hack, Bitwise has compiled an overview of which institutions already offer regulated structures for the storage of Bitcoin. Outlining that, Bitwise clearly shows that crypto currencies are increasingly being stored by large institutions as a sign of maturity.

With regard to the increasing importance of Bitcoin’s futures market (BTC), Bitwise cites the following graph, according to which the Bitcoin futures volume on the CME and CBOE, expressed as a percentage of the Bitcoin spot volume, has steadily increased and occupies a significant share. It should be noted, however, that the CBOE stopped trading Bitcoin futures in March due to a lack of interest and futures contracts for Bitcoin are now only offered on the CME.

In addition, according to Bitwise, the previous report on fake volumes of cryptocurrency exchanges has helped shake the industry and bring about positive changes. Accordingly, the report has been widely discussed in all media and on many social media platforms. On the other hand, the report led to rapid reactions from exchanges such as Binance and crypto data providers such as CoinMarketCap.

The industry as a whole reacted to the report and launched various initiatives. For example, CoinMarketCap has launched an initiative called “Data Accountability & Transparency Alliance” and/or “DATA” to improve its market data.

In addition, the “Fake Exchanges” recorded a volume decline of more than 90 percent. According to Bitwise, trading volumes on certain exchanges have quickly shifted to “real” values:

Approval of a Bitcoin ETF still seems unlikely

Even if the results of the presentation sound very positive, many experts currently see a rather small chance that any Bitcoin ETF will be approved in 2019. SEC Chairman Jay Clayton recently stated that there are still strong concerns and that trading needs to be better regulated. Accordingly, publication should not be construed as approval by the regulator.

The SEC currently has time until October 14 to decide on the proposal submitted by Bitwise and the NYSE Arca.

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