At the time of writing, Bitcoin (BTC) has declined to the $7,920 mark after a decrease of more than 3 percent since the announcement was made. However, a new proposal with a few changes in rules was submitted in June.
The SEC also stressed that the rejection was not based on an assessment of whether Bitcoin or blockchain technology has inherent value as a path breaking technology or investment vehicle.
"More institutional participation would ameliorate numerous Commission's concerns with the bitcoin market that underlie its disapproval order".
The Securities and Exchange Commission (SEC) announced Thursday that it would not approve what would have been the first-ever exchange-traded fund (ETF) to track Bitcoin. "Indeed, if the disapproval order's rigorous standard were applied consistently, many commodity-based ETPs would be in peril, as rumors of manipulation plague many commodity markets, and surveillance-sharing agreements with regulated markets can not eliminate the sometimes-messy nature of the commodities markets".
Is second crypto ETF rejection as bad as the first?
Why the SEC thinks Bitcoin still isn't ready for the big time
The SEC have also delayed a judgement on Arca Inc.'s request to trade five Direxion bitcoin ETFs - dating back to January this year.
But the SEC said BZX, an equities market operated by CBOE Global Markets, failed to demonstrate that its proposed change to market rules would not create the risk of fraud and "manipulative acts".
"The Trust intends to achieve this objective by investing substantially all of its assets in bitcoin traded primarily in the over-the-counter ("OTC") markets, though the Trust may also invest in bitcoin traded on domestic and worldwide bitcoin exchanges, depending on liquidity and otherwise at the Trust's discretion".
Bitcoin's roller-coaster ride follows a frenzy of speculation on the prospects for an ETF that's helped the largest virtual currency rise more than 30 per cent since the start of July. Do your market research before investing in cryptocurrencies. She argued that the movement of Bitcoin ETPs into the market would foster a sense of institutionalization that would target the problems that the Commission faces with the Bitcoin market.
Earlier this week, another candidate for the launch of bitcoin-ETF investment company VanEck Associates sent a letter to the SEC, in which it expressed the belief that the industry is ready to accept and support such financial instrument. An ETP based on bitcoin would offer investors indirect exposure to bitcoin through a product that trades on a regulated securities market and in a manner that eliminates some of the frictions and worries of buying and holding bitcoin directly.
Investor access to the products is a critical component in the SEC's decision, as their main intention is to protect unsavvy investors from risky investments.
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