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On Friday, 10 March 2017, the US Security Exchange Commission declined the application for a Bitcoin based ETF. As predicted, the bitcoin value fell sharply within moments of the announcement, quickly losing 15% as it briefly dipped below the $1,000 mark for the first time in 3 months.
As expected, bitcoin critics lauded the disapproval as an indication that bitcoin isn’t a ‘real currency’ and shouldn’t be considered an investment vehicle at all.
But the fact is I’d already predicted the rejection in a recent interview with IG TV and stated that Bitcoin doesn’t need the ETF to thrive. I believe the disapproval is good news for bitcoin.
In it’s official notice, the SEC stated:
"...the Commission is disapproving this proposed rule change because it does not find the proposal to be consistent with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest."
In short, due to the fact that the bitcoin market isn’t regulated and can’t be subject to surveillance, they can’t approve the listing.
It was never intended to be a regulated in the same way as traditional systems are. It wasn’t created to be subject to 3rd party mediation. It’s core purpose was to provide an alternative to the traditional financial system - not to be intertwined with it.
An approval may’ve been a short term psychological ‘win’ for bitcoin; being ‘recognised’ by ‘the powers that be’ of having a place within the system, but the long-term repercussions on the sovereignty of bitcoin and its users could’ve been dangerous.
Many got sucked into the belief that if the SEC approved the COIN listing, bitcoin would’ve finally ‘arrived’.
Bitcoin functions - and functions exceptionally well - outside of the restraints and regulation of any government backed corporation. Bitcoin offers us the freedom to transact at our own will, anywhere we like, with whomever we like, without permission from large, government-backed banking institutions and intermediaries, who each tack on fees for the ‘privilege’ to do so.
With bitcoin, we’re not subject to scrutiny and surveillance on our own finances. Bitcoin doesn’t need outside regulation based on manipulated human rules; it uses objective mathematics to self-regulate and protect itself from undue influence.
These unique, alluring qualities of bitcoin and the empowerment they provide, are precisely the reason the ETF isn’t essential, or even relevant, to bitcoin’s success.
As for the impact on the bitcoin price; well, considering all the purely retail-orientated investors jumped ship and left a treasure trove of below-market value coins behind, the stronghold investors took advantage and bitcoin recovered - within a mere hour of the announcement - to stablise around the $1,200 point, perfectly positioned to continue its ongoing rival for parity with gold.