Will the SEC finally approve a Spot Bitcoin ETF?

Source

Perfect Record

The SEC went ahead and rejected another spot Bitcoin ETF keeping their perfect record of rejecting these things intact. After rejecting VanEck's proposal in November, they'll look to end the year with one more rejection before Christmas.

Not so fast

Also happening right now, Grayscale has sent a letter to the SEC outlining "discrepancies in its rejection of Bitcoin spot ETFs, and it's acceptance of Bitcoin futures ETFs." They argue that there is no basis for approving the futures while denying the spot, since they are both based upon the same asset.

The key here is they are claiming the SEC "violated the Administrative Protections Act (APA) by failing to treat the two Bitcoin ETF products the same." In other words, this has now become a legal issue. It would seem Grayscale has a point here.

If you look at the rationale from the SEC on the latest rejection, they state that the proposed ETF would not allow the SEC:

“to obtain information necessary to detect, investigate, and deter fraud and market manipulation, as well as violations of exchange rules and applicable federal securities laws and rules.”

They went on to say that the exchange had not provided sufficient means:

“to prevent fraudulent and manipulative acts and practices”

in any potential listing.

But the question becomes: how can ETF's on futures be okay while ETF's on the actual asset itself are not? The manipulation they are allegedly concerned about in relation to the spot ETF could have every bit as much of an impact on the futures as on the spot. They say they are "protecting" investors from fraud and manipulation by rejecting the spot ETFs, but it's okay to defraud, manipulate, and wreck futures investors?!? Something doesn't add up here.

Canada beating the US to market....again

In the meantime, Fidelity Canada is reportedly launching a spot Bitcoin ETF. Once again, Canada is going to beat the US to the market with a product. This is Fidelity mind you. This isn't some fly-by-night operation. According to Investopedia.com, as of June 2021, Fidelity had over $11.1 trillion in customer assets under management. Obviously it's not all in Canada, but it doesn't seem like much of a stretch to think this could be a pretty successful venture for them.

Why they won't

Transparency

So what does this all mean? I've been on record for months as saying the SEC will never allow a Bitcoin spot ETF. The danger of a spot ETF is that it requires the fund to actually buy and hold the underlying asset. In this case, Bitcoin. Doing this will take even more Bitcoin off the market and will shine a potential spotlight on the manipulation actually occurring in the futures markets.

All you have to do is look at precious metals. I'm not sure where they are lately, but over the summer people had to pay 10-20% more than the spot price if they actually wanted to take delivery of real gold or silver. That's because the spot price on Wall Street is a completely manipulated number. The paper market for gold is 10 times bigger than the actual amount of gold in existence. This allows the gov't or the Federal Reserve and the legacy banking system to block any major runs in value by flooding the market with paper.

You would think at some point there would just be a short squeeze so big it would break through all of that paper. But not with pockets that deep. Or with the banking system beholden to them.

This is why they don't want to allow a Bitcoin spot ETF. They are not ready to handle the kind of money that could flood into the asset (and out of the legacy system). And they are certainly not ready for the transparency the blockchain shines on what is happening with actual Bitcoin, and not just futures. Combined with the fact that there is a finite supply of Bitcoin in existence, and the legacy banking system literally can't afford to allow simple supply and demand to dictate price.

Crypto is outside the legacy system

The other thing holding them back is the fact that they don't have many players in the system yet. Bitcoin was built to be outside the system. That's what crypto is. As recently as a five years ago, it was a "cute" little asset that fringe players and techies could play around with. Not a threat at all. That all changed with the last bull run. But even that didn't really threaten the legacy system. What is a $500B asset compared to the hundreds of trillions in the legacy system?

Why they will

But big-tech got involved. And so did Wall Street. NOW there are real dollars at work and the innovations coming to the space continue to expand it exponentially. While it still may not pose much of a threat as it stands, the day is coming when it will.

In September, El Salvador became the first country to accept Bitcoin as legal tender. While the mainstream media continues to try and downplay this as a "gimmick", the fact of the matter is that people don't pay taxes and "gains" made when their currency strengthens. If your $1000 US buys you 50 toy trucks from China one year, and buys you 100 toy trucks from China the next year, you don't pay a tax on that increased buying power. It's a currency that has gained strength relative to other currencies. If Bitcoin starts becoming legal tender in other countries around the world, it could start to really mess with governments' ability to tax it's citizens. While that is likely years away, it has now popped up on the radar.

In November, MiamiCoin announced it will be giving "bitcoin dividends" to its citizens. The plan is for the city's Bitcoin investments to potentially eliminate the need for the city to tax it's residents. In three short months, their investments have generated almost 20%, on an annualized basis, of the city's entire yearly tax revenue. In other words, Bitcoin is working.

Conclusion

So, to make a long story short, I am officially changing my mind on whether the SEC will approve a spot Bitcoin ETF. I think it has now become inevitable that they will have to. The question now becomes what sort of regulation are they going to come up with to keep their corrupt little fingers in the pie?

I have no idea. Will they try to absolutely destroy the price, rekking thousands of people so they can step in and "protect" the citizens with regulation? Will they unleash the IRS on the "middle class" with loudly publicized prosecutions trying to scare people out of the asset class? Or will they try to create their own CBDC and legislate that people must use it?

Who knows? But I can virtually guarantee you they won't go without a fight. And it won't be pretty. Like I said, their biggest problem is that crypto has sprung up as a force to be reckoned with, and they don't have any of their people inside of it to either put on the brakes, or at least direct it in the direction they want it to go. Just as the middle-class has little to no representation in our nations' governments, the legacy system is still on the outside looking in at crypto.

The race becomes whether we the people can elect leaders who view crypto as what it is: freedom from the legacy-controlled system, or whether those legacy leaders can work their way inside the cryptosphere and reestablish "control" from there.

It's going to be interesting.

As always, comments are welcomed and appreciated. Thanks for reading!

Posted Using LeoFinance ^Beta