Bitcoin ETF

Last Friday the SEC released a long-awaited ruling that denied a request for the first US exchange traded fund tracking the digital currency Bitcoin (Bitcoin US:BTCUSD) which fell as much as 18% in trading ($300 of value) rebounded to close down 7.8% and trading in the $1170 area. Note that BTC had a nice ‘move’ into the anticipation of a favorable SEC ruling and hitting a high of $1350. 

Let me start by saying that in general, and by no means do I believe I am the judge and the jury here, that I am a supporter of Bitcoin and its uses. I have written a few articles about BTC and each time I compare it to a biotechnology stock that has one of the most promising and exciting drugs in the pipeline, has backing of big pharma stocks (like the Winklevoss guys from Facebook backing BTC) and is waiting for Phase 3 final approval… so the general public can use it which is carefully regulated by the FDA or in this case the SEC. Much how Bitcoin was denied entry into the so called mainstream of what would be an interesting financial instrument to say the least. Few can deny that the price action of BTC was positive and just like any stock, the volatility was welcomed, shook out some people and buying on weakness was evident.

Why this ETF denial is actually a good thing?

How and why does the above apply to Bitcoin ($ BTC) and why this ETF denial is actually a good thing? Since I said above, I am a believer in Bitcoin etc. but the common denominator for the denial of the BTC ETF is the unregulated nature of Bitcoin itself. Ok I get it but let me bring this point up, back in the 1920’s. when the trading for WHEAT started and ‘was approved’, one can’t tell me that everyone was on board and started buying bushels of wheat left and right instead of a gov’t bond or US Steel at first? I’m sure there was some skepticism as well but those that were in early and took the risks of the learning curve and weathered thru the regulations and potentials denials got paid…much like BTC. Apple Computer ($AAPL) was $4 whose computers at the time were marginal until Steve Jobs said I can give you 5000 songs of your choice in your pocket….he got paid. The caveat here is that over time, Bitcoins growth prospects may be limited if not easily achievable through any regulated institutions or entities. Again, like a breakthrough drug that has major support whose approval(s) are only a matter of time and by the price action of BTC, it seems the dip buyers whether speculators or long term holders did step in. The numbers and charts don’t lie. 

Bottom line is there is ‘tons’ of money flowing thru Bitcoin and there are some VERY sharp people out there looking for opportunities….so if BTC was going to crash/correct or all of a sudden deemed obsolete a 7% pullback I will call it is healthy and more of the ‘buy the rumor and sell the news’ action.mIf the stock were $NFLX and ran up into material news and only had a 7% pullback, I would add be quite encouraged considering what could’ve happened. As long as the fundamentals of BTC are not affected and BTC becomes more accessible (this publicity didn’t hurt IMO) I can’t help think that BTC price is upwards.

Also to edify my point is the fact that Tradeview accepts Bitcoin as form of deposit and although we are not as big as Goldman Sachs or JP Morgan, our back office operations and internal compliance departments have to be even better. If we take as form of payment, then I may not know where the price may go but fundamentally is good enough for me.

Kazem Ghouchani

 

Michael Venezia
Head of Trading
mvenezia@tvmarkets.com