The Securities and Exchange Commission (SEC) rejects Bitcoin ETFs due to fake and manipulative volume

The Securities and Exchange Commission (SEC) rejects Bitcoin ETFs due to fake and manipulative volume

It’s no secret that the Securities and Exchange Commission (SEC) has not approved a Bitcoin spot ETF. Where March 2017The commission has made it clear repeatedly that it cannot allow non-US exchanges with fake and manipulative trading activity to mislead US investors about the real market for bitcoin.

The Securities and Exchange Commission has so far unsuccessfully asked crypto exchanges to share data to verify activity. According to estimates, the volume of fake bitcoin deals far outnumbers legitimate deals. Crypto index Fund manager Bitwise’s Online a tool It states that 95% of the bitcoin volume reported by cryptocurrency exchanges is illegal.

Various analysis by Forbes It puts the number at 51% well below Bitwise’s estimate, yet still a shocking projection of Manipulation through cryptocurrency exchange. Forbes based its estimate, which was published in August, on an analysis of trading volumes on 157 exchanges.

To make matters worse, even US stock exchanges appear to be falsifying trading activity. In June this year, the Commodity Futures Trading Commission Foot The charges against Gemini are from Tyler and Cameron Winklevoss, accusing the company of lying about market manipulation on its future platform. The CFTC also alleged that Gemini made misleading statements and was omitted in 2017 regarding suspicious bitcoin trades.

Critics of the SEC’s rejection of the Bitcoin ETF have accused the agency of being opaque and anti-Bitcoin. However, communications from the Commission tend to be fairly specific about its concerns. Currently, there are five full years of response letters for ETF applicants to review.

Securities and Exchange Commission also Hosts business hours and meetings For applicants Bitcoin ETF. For example, on March 20, 2019, Lauren Yates of the Securities and Exchange Commission’s Trading and Markets Division, Office of Market Oversight, Quote A meeting between the SEC, Bitwise Asset Management, NYSE Arca and the law firm Vedder Price. The meeting included a discussion of NYSE Arca’s proposal to list Bitwise’s Bitcoin ETF Trust.

Yates attach slide shows from a presentation by Bitwise. According to the presentation, Bitwise plans for the Bitcoin ETF Trust to provide direct exposure to bitcoin through a regulated, insured, and third-party trustee. She acknowledged the Securities and Exchange Commission’s concerns about market manipulation and said it could mitigate them.

95% of self-reported exchange volumes are untrustworthy

Bitwise claimed that up to 95% of the trading volume reported to CoinMarketCap in relation to Bitcoin trades may be fake or uneconomic (laundering trading is an example of uneconomic volume). Cryptocurrency exchanges continue to lie today in order to convey liquidity and power – the actual volume of Bitcoin and all cryptocurrency markets is just a fraction of what the exchanges offer via their APIs.

Bitwise showed screenshots of trades from what it called a more “real” exchange – Coinbase Pro – noting that market manipulation is less likely on US exchanges. Moreover, offshore exchanges are likely to have less reliable trading volumes, Fewer website visitorswider offer/demand spread, and fewer followers on social media.

The San Francisco-based index fund manager also stated that offshore exchanges are likely to have extended periods with no trading volume and lower variance in transactions.

Bitwise has published a series of methods to detect fraudulent cryptocurrency exchanges (via Bitwise).

Bitwise has accused “fake” exchanges such as CoinBene and BitMart of artificially inflating their trading volumes to attract listings on which they can charge high listing fees. At the time, according to Bitwise, they allegedly made significant money from the ICO project teams from listing fees.

For a sense of scale, Bitwise explained that the actual trading volume at the time was likely closer to $273 million From 6 billion dollars Notified by exchanges. Only ten of the 81 largest exchanges reported accurate remote Bitcoin transaction records.

  • Bitwise was submitted to the SEC in March 2019.
  • Other bitcoin price index providers follow similar models to calculate a reliable price.
  • Indexes by Bloomberg, S&P, CF Benchmarks, Brave New Coin, Coindesk, and CryptoCompare exclude all types of self-reported exchange data when calculating the price of bitcoin.

Request from the Securities and Exchange Commission (SEC) to reject spot Bitcoin ETFs

Bitwise’s bid did little to reassure the Securities and Exchange Commission. In June 2022, Grayscale’s proposed ETF was rejected by the Securities and Exchange Commission. She said Grayscale had failed to address its concerns about market manipulation. Grayscale quickly filed a lawsuit claiming that the . file SEC incorrectly rejected Its proposal to convert its GBTC product into an ETF.

In January 2022, the Securities and Exchange Commission unacceptable SkyBridge Bitcoin ETF for similar reasons. It said SkyBridge had failed to demonstrate that it would “prevent fraudulent and manipulative acts and practices”.

Read more: Gary Gensler still supports SEC to be the best crypto regulator

In November 2021, the committee also rejected VanEck’s Bitcoin spot ETF Request. “The SEC’s decision to reject the VanEck Bitcoin ETF application is not surprising, given the comments that SEC President Gary Gensler has made in recent months,” Christopher Vecchio, chief strategist at DailyFX. Tell The Street.

Gensler previously indicated that the Securities and Exchange Commission (SEC) intends to spend its time with spot exchange-traded funds until Congress provides more clarity about Which regulatory agency is responsible To monitor matters relating to digital assets.

Other crypto markets are awash in the laundering trade

In 2022, the washing business gained attention by analyzing the NFT markets. Bloomberg He wrote in April that since its launch, 95% of traders in the popular NFT market, LooksRare have been selling NFT themselves. The outlet noted that the wash trading on LooksRare helped the market mask the overall decline in demand for NFTs.

Chainalysis backed this up with a report indicating the inclusion of the NFT market Lots of laundry business Even a small amount of money laundering. Chainalysis February 2022 Report On dishonest activity in the NFT space indicates that the laundry deals generated millions in profits for the dealers themselves.

Chainalysis found a significant increase in funds sent from NFT markets to wallets identified due to sanctions risk (via Chainalysis).

So, with no end in sight to trading laundering, fake volume reports, and market manipulation, is there any hope for a Bitcoin spot ETF? Ultimately, in the distant future, the Securities and Exchange Commission may approve the ETF. Previously, Bitcoin investors were given a ray of hope: the commissioners Certified futures-based ETFs By ProShares and Valkyrie – which started trading on NYSE Arca And the Nasdaqrespectively – in October 2021.

However, the committee continues to show its reluctance to approve bitcoin ETFs or other complex ETFs, such as products that provide leverage or short exposure to the price of bitcoin.

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