A Bitcoin ETF is Still Years Away

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  • The rejection of the VanEck Bitcoin ETF highlighted similar issues
  • Concentrated bitcoin ownership and the role of Tether were highlighted in the VanEck rejection
  • The SEC’s issues will likely not be resolved in the coming months or perhaps even years

The Securities and Exchange Commission’s (SEC) rejection of the VanEck Bitcoin ETF last week highlighted the same old issues that have plagued spot Bitcoin ETFs since the Winklevoss twins first applied for one in 2013. The SEC stated that concerns over price manipulation by whales and the ongoing concern over the role of Tether in the ecosystem undermined any advances in other areas that Bitcoin has made in the years since the ETF hype of 2018, all of which suggests that a spot Bitcoin ETF will not be countenanced until those two areas are addressed.

Price Manipulation Concerns Remain Strong

The SEC has had a bee in its bonnet over price manipulation by large Bitcoin holders since the concept of a Bitcoin ETF was a thing. As usual when it comes to Bitcoin, different studies show different data, and we don’t know what information the SEC is using to study bitcoin ownership concentration. Data site Glassnode alluded to this in a February 2021 report on Bitcoin concentration:

The problem with these reports is that they analyze the distribution of BTC across network addresses. This leads to misleading statistics, which result in false narratives around BTC ownership among stakeholders.

The SEC is clearly getting its data from a source that reinforces the notion of a small number of whales holding a large proportion of the coins, and unless that concentration drops then this argument of price manipulation will persist. Given that this concentration has been in place for something like a decade, change is not in the wind.

Tether Issue Rears Its Head

The other issue the SEC is worried about is the role of Tether, a name that has become a running sore in the Bitcoin world. Tether may have proclaimed its innocence in settling multibillion dollar cases with the CFTC and NYDIG this year, but this doesn’t seem to have appeased the SEC who still see the stablecoin giant as being the wind that could bring the whole house of cards tumbling down.

This means that until Tether takes steps to appease the SEC, which can only be regular full audits by a body the SEC approves of, it will always be suspicious of the stablecoin issuer. Even if it does undertake regular, full audits, we can’t be sure that this will be enough for the SEC – after all Tether is only backed by around 4% cash, what if the SEC is more worried about Tether’s backing rather than its lack of transparency? Only Tether can address this, and they seem reluctant to do so.

No Bitcoin ETF Until 2023?

It is highly unlikely that either of these two scenarios will be satisfactorily dealt with by the concerned parties in the near future, all of which means that a spot Bitcoin ETF is not on the cards for 2022 and it may not even be until 2023 at the earliest that we see enough of a change in the ecosystem for the SEC to be happy enough to approve a spot Bitcoin ETF.