As I’m sure many of you have heard, the SEC delayed its decision on the Van Eck bitcoin ETF proposal. The SEC now says it will issue a ruling by September 30 (though it could come earlier). The delay was predictable – so was the market overreaction. It doesn’t worry us. There’s something much bigger at play here – and the market is missing it.
Let’s start with why the SEC delayed the Van Eck bitcoin ETF proposal. I’ve been covering the government – and more importantly, regulators – for more than a decade. And the letter the SEC issued this week is as boilerplate as it gets. This indicates to me a few things:
- There is no easy consensus to reach. The battle lines are already drawn. As we reported earlier, the SEC has some concerns surrounding bitcoin ETFs – mostly dealing with price volatility and market manipulation.
- The SEC knows it has to act. One SEC commissioner, Hester Peirce, published a sharp dissent after an earlier ETF proposal was denied. And institutional pressure is growing. Van Eck manages dozens of ETF funds and has nearly $50 billion in assets under management. This is Van Eck’s third try at getting a bitcoin ETF. Van Eck is a major player in this space. The SEC really doesn’t want to keep saying no to Van Eck – or the dozen other ETF applicants who are not going away.
- Outside pressure is building on the SEC to act. The parent company of the New York Stock Exchange, Intercontinental Exchange (ICE), is building its own cryptocurrency trading platform. The platform, called Bakkt, is being built in partnership with Microsoft and some financial heavy hitters, including Pantera Capital, Susquehanna International and Fortress Investment Group. It will have custodial solutions built for institutional investors. It’s slated to be launched in November. And it will be regulated by the Commodity Futures Trading Commission (CFTC). The SEC DOES NOT want the institutional investors that it governs to bypass it and flee to ICE to access crypto investments.
- The regulators wanted to get out of town. The federal government, for the most part, flees Washington in August because of the heat and humidity. So the SEC didn’t want to hash this out with no obvious consensus and a crew of people who have their minds on the beach… not cryptocurrency.
The market reacted to the SEC’s ETF decision delay as a bad thing. But it didn’t take the bigger picture into account. The SEC didn’t say “No.” And that’s because a bitcoin ETF is going to happen. A regulated crypto exchange is going to happen as well.
The clock is ticking. Everyone knows it, including the SEC. The institutional boom is coming. And the best play is to buy in before it hits. Because when institutional money floods into the market, the price of bitcoin will soar.
Good investing,
Vin Narayanan
Senior Managing Editor, Crypto Asset Strategies