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Bitcoin ETF Decision is Testing Institutional Investor’s Patience

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The United States Securities and Exchange Commission (SEC) on Tuesday delayed its decision regarding the approval of a bitcoin exchange-traded fund (ETF) put forward by Bitwise. The proposal was first filed at the beginning of this year and in March the regulatory body had pushed its decision on Bitwise‘s and VanEck/SolidX proposals till May.

The latest delay in the decision can be seen in the hindsight of the bull-run that is being witnessed right now in the crypto world but it is not a complete buzz killer. At the time of writing, bitcoin is still floating around the highs that it gained over the past few weeks. It is fluctuating around the $8kmark and has already attracted a lot of attention from the global financial world. Although the decision by SEC has not directly influenced bitcoin’s price significantly, it remains to be seen how its ripples spread out. It is largely expressed by many experts in the crypto game that it is only a matter of time before a crypto ETF gets approved. Last year, when an ETF proposal by the Winklevoss twins was dismissed by the SEC, one of its commissioners, Hester M. Peirce, showed her dissent, stating:

“The Commission’s mission historically has been, and should continue to be, to ensure that investors have the information they need to make intelligent investment decisions and that the rules of the exchange are designed to provide transparency and prevent manipulation as market participants interact with each other. The Commission steps beyond this limited role when it focuses instead on the quality and characteristics of the markets underlying a product that an exchange seeks to list”.

READ ALSO: SEC’s Commissioner Shows Dissent on the Rejection of Bitcoin ETF Proposal

So what is the buzz around this crypto-linked ETF and how is it significant?

A crypto-linked exchange-traded fund is expected to provide the institutional investors wanting to enter the crypto game with a secondary layer to play with. Hitherto, there is a clear lack of regulation in the crypto space. Owing to this shortcoming, the number of scams, illegal activities and frauds linked to the cryptocurrencies is extremely large. This is why institutional investors do not want to directly get in touch with this ‘dirty’ space. But with a crypto-linked ETF in place, a passageway will be provided to the institutions to enter this space without getting directly involved with cryptos. As a result of this, a large amount of institutional money which has been sitting on the sidelines is expected to flow into the cryptocurrency world, taking its market capitalization to new highs. This will also bring along more stability and credibility to the volatile world of crypto. This inflow of institutional capital is also expected to take prices of various cryptos to their new heights.

READ ALSO: Did SEC & CFTC Suggest a Self-Regulated DAO for Crypto Industry?

As of now, the market capitalization of bitcoin is very small, around $140 billion, as compared to the trillion dollar market caps of big financial institutions. Big whales of the market take advantage of this small market cap by using pump-and-dump strategies to artificially manipulate bitcoin’s price. As institutions enter this space and market cap hits trillions, it is likely that whales will be rendered far less potent than they are now to manipulate price. Despite all the benefits that are supposed to come with the establishment of a crypto-linked ETF, one can ask why the SEC has not approved it yet. The answer in a simple word would be… immaturity.

It has just been over a decade since bitcoin emerged on the financial scene. Although it emerged as a new form of global currency challenging the centuries-old banking system, it’s initial use-case was largely driven by its usage in illegal marketplaces such as the dark web. Being decentralized, there is no central party overlooking the activities which make it easier for this asset to be used in illegal activities such as money laundering. Besides, the price of bitcoin has always been volatile as well.

READ ALSO: Technology Behind Bitcoin Needs to Be Understood Before CFTC and SEC Place Regulations

One day the asset is booming and the very next day it is down in the dust. The recent spike in price shows just how volatile bitcoin is in nature. Then comes the issue of custody. Millions of dollars are being moved around and the problem of custody is something that needs to be solved through official means. Since the technology is still developing and the legislative front is also incomplete, there aren’t many concrete regulatory frameworks surrounding this space. So some of the major problems that hold back the approval of a bitcoin ETF include the problems linked to liquidity, custody, arbitrage, price manipulation and risk associated with this uncertain space. The biggest challenge for the SEC is to ensure the security of its investors and to provide enough free space to cryptos to continue on with its innovation. Unless security of the investors is not ensured, it is unlikely that the SEC will approve an ETF.

Experts have varying views about a crypto-linked ETF. Here are a few of them from the past:

The ETF is a great tool for institutional clients, which allows you to use crypto-actives for trading, but does not provide those benefits that are incorporated in the cryptocurrency. The ETF won’t raise the market caps since it is a derivative and that is a separate market. – Founder and Chief Executive Officer of Aximetria

READ ALSO: Here’s Why There’ll be no Bitcoin ETF in Six Months

“Having a crypto linked ETF would bring institutional legitimacy and liquidity. Exchange traded funds need to be approved by the SEC, and so far the SEC has been hesitant due to rampant price manipulation. Approval would mean that this hurdle was addressed, encouraging institutional players like banks to create markets and get involved in the market. Larger institutional investors need increased liquidity in the crypto markets to be able to trade meaningfully. As more institutional players jump in, more retail (individuals) would likely follow suit. Overall it would be a boon for market activity in cryptocurrencies. – Anna Yen, Equity Derivatives Expert

The approval of a bitcoin-backed ETF will likely boost the price of BTC (and as a result other crypto assets) if history serves as any guide. The launch of gold-backed ETFs in the early 2000s granted a wider investor base access to the yellow metal. The increased demand for these products and the broad weakness in the US Dollar helped spur the multi-year run up in gold prices from ~2002-2011. – Co-founder Delphi Digital, Kevin Kelly

An ETF is seen as a positive move for the crypto world. However, it remains to be seen when it gets established.

 

source:blockpublisher

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Bitcoin trades dangerously close to $10,000 mark

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  • Bitcoin’s (BTC/USD) rebound from August lows remains short-lived.
  • Satoshi Nakamoto is said to reveal identity later on Sunday. 
  • A break below $10,000 could attract more sellers. 

Bitcoin (BTC/USD) dropped to its lowest level since late July at $9,467 on Thursday and brought in bargain shoppers to help the BTC/USD retake the critical $10,000 handle. With markets reacting positively to New York Financial Regulator approving Bakkt to provide custody services for Bitcoin, the pair’s rebound extended to $10,540 late Friday. However, investors seemed reluctant to add to their positions while trying to asses what this announcement means for Bitcoin’s future.

Although many see that this development attracting more institutional investors and opening the door for the introduction of altcoin futures, the market sentiment hasn’t turned positive yet. With the exception of Ripple, the top-ten cryptocurrencies with regards to market capitalization closed the day in the negative territory on Saturday and are now having a tough time gaining traction. 

Meanwhile, in a press release on Friday, Globe Newswire said Satoshi Nakamoto, the mysterious person behind Bitcoin, will reveal his identity and vision for Bitcoin on Sunday. “After a decade of anonymity, Satoshi Nakamoto will break his silence in Part I of his “My Reveal” Sunday, Aug. 18, at 4 p.m. EDT on the Satoshi Nakamoto Renaissance Holdings website, and the Ivy McLemore & Associates website,” the statement read. “In addition to his real-life identity, Nakamoto will use “My Reveal” to divulge such facts as his country of origin, education, professional background, and why he has yet to move any of his 980,000 bitcoins.”

Technical outlook

After erasing 1.4% on Saturday, Bitcoin continues to edge lower on Sunday and was last seen trading at $10,174, down 0.8% on a daily basis. On the daily chart, the Relative Strength Index (RSI) continues to inch lower and is now at 43, confirming the near-term bearish outlook. Moreover, the 20-day Moving Average (DMA) fell below the 50-DMA today to support that view.

$10,000 (psychological level/Fibonacci 61.8% retracement of June rally) is seen as a critical support level and a drop below that level could cause the selling pressure to gather momentum. $9,500 (Aug. 15 low) and $9,000 (psychological level/Jul. 17 low/Fibonacci 78.6% retracement of June rally) could be targeted on the downside. On the other hand, a strong dynamic resistance seems to have formed at $10,800/$10,900 region (20-DMA/50-DMA/Fibonacci 50% retracement of June rally) ahead of $11,500 (Fibonacci 38.2% retracement of June rally).

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Bitcoin as protest: Hong Kong demonstrators withdraw their money from banking system

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Protesters in Hong Kong have taken to a new non-violent tactic, withdrawing cash in mass from ATMs and banks and converting it to U.S. dollars—foreshadowing things to come for Bitcoin.

On Aug. 16, protesters in Hong Kong announced plans to withdraw their cash from the banking system in protest of overreach from mainland China, reported Business Insider. Bitcoin may play a key role in these kinds of protests in the near future.

The demonstration, said organizers, is meant to protect people’s wealth from the possibility of devaluation following a mainland military crackdown while reasserting the freedom of Hong Kong’s independent financial regime.

Background on the Hong Kong extradition protests

Protests began in response to an extradition bill ordered by Hong Kong chief executive Carrie Lam. The bill would have allowed case-by-case transfers of fugitives to jurisdictions without extradition treaties with the city—including mainland China.

The inclusion of mainland China in the treaty is a major concern for pro-independence activists. In part, people fear that Hong Kong’s judiciary would be abused by the Communist party via the treaty, potentially using the treaty to eliminate political opponents and dissidents who were previously out of reach in Hong Kong.

And, those fears are not unsubstantiated. When Xi Jingping rose to power in 2012 the space for dissenters shrunk substantially. Human rights activists say forced ‘disappearances’ have been on the rise, while the BBC described the Communist Party’s control becoming “tougher and more systematic.”

As a result, there is a very real concern that the inclusion of an extradition treaty could lead to more overreach from the mainland.

However, as protests turned into clashes with police, mainland China started to flex its military strength—seemingly to intimidate Hongkongers into submission. State run media outlets ran videos of military vehicles amassing near the border of the city. Military buildup was reaffirmed in a tweet from President Donald Trump:

Battle for independence

As tensions escalated, the protests morphed into a much broader debate over Hong Kong’s relationship with mainland China. After over 150 years of British rule, many people in the region have developed more affinity for Western ideals and culture.

As a point of emphasis, some protesters even waved British and American flags and sang the U.S. national anthem—acts of irreverence that are totally preposterous on the mainland.

Now, the Communist Party is attempting to rein-in the freedom of the administrative region as the Chinese federal government continues its quest of unifying its 1.3+ billion citizens. Fearing the loss of privileges, protesters are calling for much broader reforms than initially demanded in the extradition protests. The main demands include:

  1. Completely withdraw from the extradition bill;
  2. Retract statements saying that the protests were riots;
  3. Withdraw criminal charges against all protesters;
  4. Thoroughly investigate the abuse of power by local police;
  5. Have chief executive Carrie Lam resign and dissolve the pseudo-democratic Hong Kong Legislative Council by administrative order;
  6. Immediate implementation of universal suffrage (democratic voting) for the Legislative Council and chief executive elections.

Cash out Hong Kong

Protestors are getting more creative in their tactics as things escalate with law enforcement. For example, after a university leader was arrested for using laser pointers against police—which the police branded as “offensive weapons”—the device gained mass popularity among demonstrators.

Now, protesters have taken to a new tactic: sucking the cash out of the local banking system. Posts on Hong Kong social media board LIHKG, the local equivalent to Reddit, show hundreds of photos of people withdrawing hard currency from banks and ATMs. Some protesters are even making trips to multiple ATMs to circumvent the HK$20,000 (~$2,500) limit per transaction.

There are yet to be any confirmed reports of the amount of money that is being withdrawn but Business Insider reported that at least 400 protesters recorded their withdrawals.

However, there are reports of ATMs around the city running out of cash. Although things aren’t dire for Hong Kong banks just yet, should enough people participate in such an event has the potential to disrupt cash access in the city—and in an extreme scenario, precipitate a bank run.

Bitcoin as protest

People peacefully opting-out of local monetary systems could foreshadow the power of Bitcoin. There are currently tight capital controls in China that allow the mainland government to maintain an artificially lowtrading peg with the U.S. dollar to stimulate exports.

This manifests itself in strict financial limitations on the mainland. Chinese citizens can only acquire and move up to $50,000 out of the country per year. These currency transactions are centrally recorded and closely tracked. There are also controls on domestic currency movement. As a relevant example, people going from Hong Kong to Shenzhen people are limited to bringing a maximum of the equivalent of $5,000 without onerous declarations.

The systematic devaluation and management of the yuan means that Chinese citizens are deprived of the real purchasing power of their money. Most Chinese people are unable to invest in safer and more lucrative foreign investments because of these controls. Furthermore, a weak currency drastically decreases the purchasing power of consumers, decreasing consumption and further making the Chinese economy dependent on exports.

Not only that, China’s currency reserves and financial controls will be further stress-tested as the trade war with the United States escalates. Just two weeks ago, the yuan weakened past the 7 RMB per USD peg for the first time since 2008 in response to President Donald Trump’s abrupt escalation of tariffs on Chinese goods.

One thing to keep in mind is that Hongkongers have their own respective currency under the “one country, two systems” compromise. Since 1983, the Hong Kong dollar has had a linked exchange rate system that pegs it to the U.S. dollar at a 7.8 to 1 ratio. And, given that the dollar is the most stable and highly traded currency on the planet, it would be strange for the protesters not to use it for their demonstrations.

But, if dollars were not accessible in the city then it wouldn’t be unreasonable to use Bitcoin. Along that line, there are still reports of increased demand for BTC in the city in response to protests.  With tensions with mainland China rising, expect HKD’s peg to the USD to be stressed while capital to flees from the independent administrative region.

Opting-out of government control

With the advent of Bitcoin, people living under financially controlling regimes, like China’s, have the opportunity to opt-out of the system. Instead of enduring implicit wealth transfers through currency devaluation or inflation (arguably another form of taxation) people can instead buy BTC.

Bitcoin is an ideal protest instrument. Bitcoin can be stored in such a way where it is near-impossible to confiscate and can be used in a way to transfer huge amounts of wealth without regard for borders.

As such, data shows that black markets are quickly forming—and growing—in countries which are financially restrictive (and have adequate internet penetration), as evidenced by strong growth in peer-to-peer trading volume in places such as Venezuela, Belarus, and Kazakhstan.

Ultimately, Bitcoin has the potential to hold governments accountable for unscrupulous currency management. If the trend in cryptocurrency adoption continues then countries such as China should be rightfully worried.

Source: cryptoslate

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Bitcoin Price, Pantomime Season, More Craig Wright Lies

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This week, US President, Donald J Trump, decided that he would like to buy Greenland, thereby completely surrounding the USA’s northern neighbor Canada. Denmark semi-politely told him to… that it wasn’t for sale. Perhaps he would have more luck buying Bitcoin?

Bitcoin Price: Down But Not Out

Well, when it comes to bitcoin price, arguably the less said about the past week, the better. Unfortunately, it’s kinda my job, so I’ll try to make this as painless as possible.

It all started reasonably positively. After a tumultuous weekend, a last-minute pump saw a bullish weekly candle closing at just over $11,500; the highest weekly close in over a year. Even Goldman Sachs was bullish on bitcoin, setting a short-term price target of $13,971, which seemed oddly specific.

However, net capital flows out of five of the top bitcoin exchanges, along with low volumes troubling support at $11k gave a hint at what was to come.

One analyst predicted that price would go as low as $8.4k to fill a futures gap. $11k fell… and then $10k and we were back to four figures. Perhaps a target in the $8000s was on the cards?

Someone had other ideas, however, and price bounced back above $10k, before briefly dipping back below on Friday. Since then we have been in an uptrend but without the steam to push past $10,500. Price has stayed above $10k but looks anything but comfortable in the short term.

Still, anyone obsessing over short-term bitcoin price changes is missing the point (or a degenerate gambler). Bitcoin is a long-term store of value, and still heading to $100k, at least according to the respected analyst, Murad Mahmudov.

Pantomime Season Comes Early… Oh No, It Doesn’t!

It seems like the Bitcoin community just can’t come to any consensus this week, as conflicting opinions were all over the news. And not just one which way price is going next.

First up for discussion was Bitcoin’s alleged wealth distribution problem. Alleged by Civic’s Vinny Lingham, that is. He spent an hour-long debate with Dan Held getting hung up on a hypothetical $10million bitcoin, and whether Satoshi’s stash was ‘fair’. Then VanEck exec, Gabor Gurbacs, stepped in to say it was all a myth and everything seemed balanced to him.

Bitcoin’s midweek crash could be down to a little known (outside of China) Ponzi scheme, or so alleged local expert, Dovey Wan. PlusToken had scammed over 200k BTC, which was starting to hit exchanges. “Not true,” said one analyst, who claimed the majority of tokens had been sent through coin mixers a month ago. Although arguably, the coins which came out of the other side of the mixers could well be flooding exchanges.

The Securities and Exchange Commission (SEC) decided that another two months of feet dragging was required before they could finally give approval or disapproval to a Bitcoin-ETF. Then out-of-the-blue the New York Department of Financial Services (NYDFS) gave approval to Bakkt’s custody solution. The company’s bond delayed physically-backed Bitcoin futures product is now expected to start trading in late September.

The only party remaining uncharacteristically quiet was BitMex, which is in the midst of a CFTC probe. Although CEO Arthur Hayes couldn’t resist the urge to poke his head above the Twitter parapet to promise that he will be back.

And Finally…

Craig Wright has been caught forging documents again. The self-proclaimed creator of Bitcoin was using a series of Bitmessage communications as part of his defense, in the case between the estate of Dave Kleiman and himself in a Florida court.

However, the creator of Bitmessage (as in actual creator, not self-proclaimed creator), Jonathan Warren, testified that the messages must be fake because the service hadn’t been released at the time of the message.

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