SEC ETF Rejections Cause Minor Turbulence, Crypto Companies Weren't Enthusiastic

The SEC announced a decision on Wednesday to reject nine proposed exchange-traded funds based on Bitcoin from three companies.

Five of these proposals came from Direxion—a company that specializes in alternative mutual funds and ETFs in general. Another two came from GraniteShares and the remaining two came from ProShare.

In an email to Cryptovest, eToro senior market analyst Mati Greenspan seemed not at all shocked at these rejections.

“It was largely apparent going into this that few people really expected these proposals to go through anyway,” he said.

He also pointed out the fact that the Bitcoin market witnessed some notable volatility when the announcement was made, which corresponds with publicly-available data we’ve looked at.

He adds that the sudden jump to $6,873 “and the plunge back happened several hours before the decisions were released,” affirming that the market correction had little, if anything, to do with the SEC’s decision.

Prior to the rejections, prominent people in the cryptocurrency world were anticipating them.

“They [those pushing for the ETF product] have addressed a couple of issues but some still remain. I think the custody issue and the lack of regulated exchanges that trade the underlying asset are the main concerns for the regulators,” said Brian Kelly, founder of crypto hedge fund BKCM LLC.

Fintech attorney Richard Levin added that it was unlikely to see an acceptance by the SEC of the ProShares proposal. However, he remained confident that the organization will eventually warm up to the idea of cryptocurrency ETFs.

This isn’t the end of the story, however. Bitcoin ETF proposals are still on the table and the SEC has been putting them off, presumably to have a better look at how they keep their ducks in a row from a regulatory perspective.

Among the proposals is one from CBOE and another from Coinbase. Both companies have a relatively healthy relationship with the SEC and one of them has prior experience in getting approval for the release of Bitcoin futures contracts.