The Bitcoin price has returned to decline after hitting its new all-time high on November 8, around 67,500 US dollars. In fact, it is retraced further $ 10,000 in 16 days. Tapping at the time of writing share of 56,500 US dollars.
Not surprisingly, when we talk about investments in bitcoin, we always profess a certain caution. Since it is a extremely volatile asset. And what happens today could already be upset the following day.
Over the past few months, Bitcoin has garnered several awards from the so-called mainstream economy, meaning by this term the traditional economy. That it challenges and tries to to change, at least in the original intentions of the still mysterious (or mysterious) creator Satoshi Nakamoto. In fact, they were launched some ETFs in the USA, and, recently, also in Spain, by the Banco Santander. One of the most important in Iberian land.
However, an abrupt halt to this rise came from the denial of the SEC – Security and Exchange Commission – to the financial giant VanEck relating to the latter’s proposal to launch a Spot ETFs that replicated Bitcoin.
According to analysts, this very event accelerated the drop in the price of Bitcoin. Which, just as it did when it hit $ 65,500, saw its value drop significantly again.
We try to understand more.
SEC Rejects VanEck Spot ETF Proposal
To deepen the question is an article published on CoinTelegraph, which specializes in cryptocurrencies. While it is true that Bitcoin (BTC) experienced an impressive rise in price when the Securities and Exchange Commission approved the exchange traded fund (ETF) proposed by another financial giant, ProShares, on futures Bitcoin at the beginning of October – precisely because it constituted a further step to its credibility – now suffers the opposite effect in the aftermath of a major denial.
Denial that the November 12, bringing the price of Bitcoin to the 30-day minimum of $ 55,705 on November 19th. Price around which it also travels at the time of writing.
Proshares’ BTC ETF was the first ETF to gain SEC approval. Which gave greater courage to other financial companies in proposing their own investment instruments. Moreover, up to that moment, they had been presented over 20 questions to financial regulators. All with negative outcome. This is a sign that something under the shadow of the imposing statue of Liberty was changing. And instead …
Jan van Eck, CEO of VanEck, made it heard all his disapproval via Twitter:
We are disappointed in today’s update from the SEC declining approval of our physical bitcoin ETF. We believe that investors should be able to gain #BTC exposure through a regulated fund and that a non-futures ETF structure is the superior approach. @tyler @gaborgurbacs
– Jan van Eck (@ JanvanEck3) November 12, 2021
In essence, van Eck said to himself deeply disappointed from the SEC’s refusal to approve their physical bitcoin ETF. Then add:
We believe that investors should be able to gain exposure to #BTC through a regulated fund and that a non-futures ETF structure is the best approach.
But obviously the SEC he doesn’t think so. And in the next paragraph we will see why.
Why SEC rejected VanEcks spot ETFs on Bitcoin
Cointelegraph also seeks to explain technically because the SEC rejected VanEcks’ spot ETF on Bitcoin
The difference among the Bitcoin ETFs approved and traded today on various stock exchanges in the United States – think of Nasdaq or CBOE – and the latter lies precisely in the fact that it is a Spot ETFs. While the other ETFs are based on futures.
Van Eck, on the other hand, trusts in the goodness of spot ETFs, considering them the best choice. In what, according to him, they offer an exhibition to bitcoin through a regulated fund. In addition to retaining an ETF not futures the best option.
The president of the SEC, Gary Gensler, which since its investiture in January 2021 has leaked a greater predisposition compared to cryptocurrencies, had already made it clear its preference for futures-based BTC ETFs versus spot ETFs.
The SEC founded its choice to reject a spot ETF that replicates Bitcoin proposed by VanEck with the fact that the financial rules are “designed to prevent fraudulent and manipulative acts and practices”. All this in order to “protect investors and the public interest.“
Here you can read the public deed by which the Security Exchange Commissions rejected VanEck’s financial instrument.
Why ETFs Move More Dangerous
While futures are often a high-risk commodity, the SEC has likely rated the VanEck ETF further risky since it allows Wall Street’s institutional money to take advantage of price movements of Bitcoin. Notoriously very volatile.
A futures contract ensures that whoever buys it also buys the underlying asset. While the author or the seller of the contract has on his part the obligation to sell and deliver the asset to a price specified on a future date that is always specified in the contract.
Futures contracts often act as a cover relative to other positions in an investor’s portfolio. Or, simply, they are used to invest in an asset without owning it directly. It is therefore a question of derivative contracts, just like i Contract for difference. They are also widely used to invest in cryptocurrencies, especially by trader retails in online trading.
In futures, leverage is particularly dangerous. It is no coincidence that an instrument called metaphorically “double edged weapon“Because, if things go wrong for the investor, since his market forecast was wrong, he will end up seeing his losses multiplied.
With futures contracts, leverage could even go up 95%. This means that the investor, taking full advantage of this opportunity, will need “alone“to invest 5% of its capital.
However, the investor also undertakes a keep a margin should things go wrong. Which results in the sale of other assets ched holds in the portfolio to hedge risks.
To understand the extent of the risk, one need only say that the European Union Financial Market Supervisory Authority, ESMA, he reduced with the directive Mifid II drastically leverage for trader retails. Bringing it for cryptocurrencies even to a level of 1: 2. Precisely because it is already a volatile asset.
Recall that trader retails are the ones who invest smaller amounts and have less experience compared to institutional traders. That is, how many invest massive capital.
Who is VanEck
As Just ETF, a site specializing in this investment tool, explains, VanEck is an asset manager founded in New York in 1955. Under the brand VanEck Vectors, ETFs represent over 75% of the total of all the assets proposed by VanEck.
At the beginning of 2018, the Dutch ETF provider took over Think ETF, integrating it as his own European subsidiary. While to make several of his own innovative indices for ETFs it uses a subsidiary based in Frankfurt am Main.
VanEck is particularly specialized in investing in gold. And it is widely believed that it offers ETFs on specialized indices difficult to find elsewhere. Indices offer exposure to assets such as preferred shares and actions negotiate at a discount with respect to intrinsic value. As well as high yield bonds who mainly deal with companies once renowned in their sector but now in decline. Or on the so-called markets emerging.
The very fact of having taken over Think ETF, has allowed VanEck to be more present on the European market. Where ETFs Have Gonei in the early 2000s, a few years later than the American market. However, finding a fast positive feedback.
We’ll see if VanEck will try a new assault with new proposals. Probably yes. Also because the market is constantly evolving and, as we have seen, before the first ETF was approved, over 20 were rejected.
Bitcoin in the world
In general, countries that are adopting Bitcoin as their currency are starting to increase. To be placed side by side with the one having legal tender. Which is also worrying him a lot USA, since the spread of this practice it takes away the flu that the American currency has around the world.
Starting right from the neighbor El Salvador, which has adopted Bitcoin as its currency having parallel legal tender to the main one. And we know how historically the United States tries to have control and influence over Latin American countries and indeed Central America.
Also in Iran the use of cryptocurrencies is spreading, however circumvent US tariffs. While in Nigeria the launch is now imminent, which will make a country even more economically developed than it is advancing enormously, albeit still snubbed by the rest of the world.
Other superpowers like China or Russia they have been thinking about it for some time, since 2017 to be exact. At least according to when they launched the first high-sounding first announcement, in conjunction with the limitations they have inflicted on cryptocurrencies. Not by chance, given that in that year the Bitcoin hI began to see flying its price clearly.
But the US itself has been thinking about it lately, col Biden government which seems more predisposed than the previous one led by the “Tycoon“Donald Trump. Which has not spared often thunders against cryptocurrencies, especially with the means that is most congenial to him: Social. So much so that he was banned from both Twitter and Facebook, forced to start it like this one on their own.
Copywriter, born in 1981.
“Born in Naples and therefore I like the sea“said the great Pino Daniele and how to blame him. This city gives you great creativity and molds you against the adversities of the world, as complicated as it is beautiful. I trained at the note Federico II University of Naples.
I love to write, watch movies, cheer for Inter, because I always complicate things!
For some years I have been involved in economics, while not losing my university background: Sociology. So, giving the arguments, however technical, a social edge.
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