The U. S. struck a blow at Bitcoin - March 19, 2017
Bitcoin has a bad time lately: its price is on a rollercoaster and last week even the U.S. Securities and Exchange Commission (SEC) denied a request to launch the first U.S. exchange traded fund (ETF). Since many believed the authority may grant Bitcoin to be traded officially, prices even hiked for a while, but when the news broke of the denial, they instantly fell 20%.
The story of bringing Bitcoin ETF to market goes back to 2013 when Cameron and Tyler Winklevoss applied to list a cryptocurrency based fund. The Commission was postponing the decision for three years, but last week they made up their mind. As they wrote in their statement: "Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated”. According to their statement, to enter the market they would need two things: “First, the exchange must have surveillance-sharing agreements […] And second, those markets must be regulated.” They found that these two principals were missing, therefore they must disapprove the Winklevoss twins’ proposal.
The denial led Bitcoin to lose almost 20% of its value instantly. Later it recovered from the shock, but all this rollercoaster shows how volatile Bitcoin is. Sometimes we hear in the news how the cryptocurrency took over the price of gold for the first time in history, but just days later it can fall approximately $260.
As Business Insider pointed out, China may be behind Bitcoin’s rise in 2016, as “The increased volume in the cryptocurrency comes as money continues to rush out of China.” But this also means that one government can have a great impact on Bitcoin prices alone, which is again, a volatility. All this lead to another 12% plunge this year, also in just days.
There are other problems which SEC sees perfectly. The lack of regulations can lead people to lose their money and they may be unable to do anything about it. European Banking Authority also released a warning about cryptocurrencies and they even mentioned some examples of lost millions. This year, we also wrote a blogpost about cryptocurrencies - Bitcoin: a bless or a curse? -, explaining how they work and what are their biggest threats as investment.
Even Winklevoss brothers – who are also known for accusing Mark Zuckerberg of stealing their idea of Facebook – agree that the missing regulations are a problem. Nonetheless, they don’t give up their fight and there are other investors who want to see Bitcoin as an ETF in the future, but it seems that authorities in Europe and the U.S. are not supporting the idea with this much volatility.
Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving high returns on their investments.