Bitcoin, altcoins bouncing back, but main issue remains unchanged
Bitcoin (BTC) protagonists will rejoice at the fact that Bitcoin and other leading cryptos are showing signs of recovery after a frightening fall from grace, recently.
BTC has stabilized around $4,300 in the last 24 hours and is at $4,128 at time of publishing, still highly volatile.
The aggregate value of all crypto assets (2076 of them) amounts to over $136 billion, backed by a respectable $17.3 billion in trading (past 24 hours).
BTC has posted a gain of over 2.5% in the past day. Bitcoin’s bounce carried over to the most other major cryptocurrencies, including Ripple’s XRP, Ethereum’s ether, and stellar lumens.
The real issue plaguing Bitcoin
Bitcoin has climbed back over the psychological $4,000 mark after falling as low as $3,600 last week amid a rout that has wiped billions from the market capitalizations of the world’s biggest cryptocurrencies.
The cryptocurrency sector has been eagerly awaiting a bitcoin Exchange-traded funds (ETFs) since early 2018, with expectations of institutional involvement in the BTC market helping to bolster the price throughout the year.
The head of the U.S. Securities and Exchange Commission (SEC) warned a much-anticipated bitcoin exchange-traded fund is “unlikely” any time soon.
In August this year, the SEC rejected nine applications for a bitcoin ETF.
Forbes reports that a lack of investor protection was blamed by the SEC chairman Jay Clayton for knocking the chances of his agency approving a bitcoin ETF in the near future, adding to fears bitcoin can be too easily stolen or manipulated on exchanges that have insufficient surveillance.
“What investors expect is that the trading in that commodity that’s underlying the ETF is trading that makes sense, is free from the risk or significant risk of manipulation,” Clayton reportedly told the Consensus Invest Conference in Manhattan. “Those kinds of safeguards don’t exist in many of the markets where digital currencies trade, and it’s an issue that needs to be addressed before I would be comfortable.”
If approved, a bitcoin ETF would mean people are able to buy into bitcoin without having to deal with old-fashioned exchanges unsure of bulky regulation and lack of public trust.
ETFs track an index or group of assets but trade like stocks. Analysts say the approval of one could bring in a wave of institutional buyers and because bitcoin has a fixed supply theoretically push up prices.
New York exchange operator Nasdaq has now confirmed it is moving ahead with a plan to list BTC futures in the first quarter of 2019.
Many potential bitcoin investors want to know whether BTC acts as a currency or a security, a question the SEC’s chairman could answer.
The New York Stock Exchange and the Nasdaq have what’s known as “surveillance,” or systems that monitor, prevent and investigate abusive and manipulative activity on the exchanges.
“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade,” Clayton said.
The SEC has said explicitly that bitcoin and ether are treated as commodities and therefore aren’t subject to that test. But all other cryptocurrencies are still seen by the SEC as securities and need to register with the agency.
“An asset like bitcoin, where it’s designed to be a replacement for sovereign currencies, we’ve determined that doesn’t have the attributes of a security,” Clayton said. “I’ll leave the commodity question to the CFTC. As far as I’m concerned, it’s designed to be akin to the dollar, the yen, the euro. And it operates that way. People who purchase it are expecting it to operate that way.”
How to safely store these assets is a major roadblock. While Bitcoin’s price itself is certainly volatile, investors could also be exposed to a risk of theft in the underlying asset, according to CNBC.
“We’ve seen some thefts around digital assets that make you scratch your head,” Clayton said. “We care that the assets underlying that ETF have good custody and that they’re not going to disappear.”
There are dozens of cryptocurrency custody solutions that have either been announced or are already on the market. Fidelity said in October that it was launching a separate company to handle cryptocurrency custody and trade execution for institutional investors, according to CNBC.
“Crypto companies Coinbase, Gemini, BitGo, Ledger and ItBit are among those already working on similar solutions. Japanese bank Nomura also announced plans in May to offer crypto custody, and Goldman Sachs and Northern Trust are reportedly exploring custodial services,” said CNBC.