Just as Fundstrat’s Tom Lee assures the bitcoin community that the currency is “returning,” the world’s largest cryptocurrency by market cap incurred a massive fall and is trading for just over $6,300. This is one of the biggest drops in recent weeks – over $900 in less than 24 hours. All of bitcoin’s recent gains have been wiped away, and investors are right back where we started.
What the Heck Is Going On?
The situation gives rise to several questions. Is bitcoin so incapable of deciding where it wants to be? How could it take so long to jump beyond $8,000 in July, just to slink back down to its previous position in only a matter of days? Bitcoin is proving itself to be more vulnerable than ever, and its reaction to the latest news is particularly overwhelming – so much so, that one can’t help but take Tom Lee’s recent words with a grain of salt.
Bitcoin 7-Day Price, from CoinMarketCap
Over $9 billion has been completely erased from the cryptocurrency space, and it appears bitcoin isn’t alone in its descent. Several altcoins and major competitors are suffering as well. Ethereum, for example, has fallen by over $50 since yesterday and is now trading for about $354, while entities like Litecoin have fallen by over nine percent.
Lagging Decisions = Lagging Price
The recent fall likely stems from the Securities and Exchange Commission’s (SEC’s) recent decision to… postpone its decision. Basically, the organization is holding off on any action regarding a bitcoin ETF proposal from VanEck SolidX Bitcoin Trust. This is the company’s third attempt to get a bitcoin ETF through the SEC’s door, and the group has consistently shown that it is either completely unaware of what to do, or simply isn’t interested. The organization has repeatedly postponed all decisions regarding such ETFs or outright rejected them.
For instance, a bitcoin ETF application was submitted merely two weeks ago by the Winklevoss Twins of the Gemini Exchange in New York. This application was ungraciously rejected, but many believed it was because the organization was too busy concentrating on the VanEck entity, which up to that point, appeared to be in good standing with the SEC and likely to garner the approval it needed to move ahead.
What Makes ETFs Unique?
Sadly, this is not the case. What’s particularly unique about this situation is that the VanEck ETF would have been backed not by futures, but by actual bitcoins. Furthermore, investors wouldn’t buy the underlying asset; rather, an ETF seeks to track the price of a specific entity that is listed on an exchange.
ETFs are often seen as a way for institutional investors to safely enter the crypto space. They can get involved in digital currency without purchasing coins via digital asset exchanges, which have been prone to various hacks and malicious activity over the past four years (i.e. Mt. Gox, CoinCheck, etc.)
A Little Background
VanEck first attempted to submit a bitcoin ETF back in March 2017, though this move was dismissed by the SEC almost instantaneously due to lack of regulation. Since then, the association appeared more open-minded when it came to crypto-based ETFs. This was witnessed after VanEck’s most recent maneuver. Instead of pushing the proposal aside altogether, the SEC voted to garner opinions from industry professionals, as well as publish the company’s application for public comment.
The application received positive feedback, and the SEC later announced it was looking into newer, less stringent legislation that would make it easier to apply for open-ended ETFs. Many believed the application would go through and give rise to the first cryptocurrency-related ETF.
SEC authorities say they will make an official decision regarding VanEck’s application on September 30 of this year.