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Winklevoss' Bitcoin Trust tanks after SEC denies application

Winklevoss' Bitcoin Trust tanks after SEC denies application

Famous for dragging Facebook founder Mark Zuckerberg to court on allegations of theft of their idea of social networking, US-based investors Cameron and Tyler Winklevoss have been trying for four year to bring bitcoin ETF. It's increased almost 30 per cent so far this year. But the SEC saw little evidence that these conditions were met. Bitcoin is primarily traded in unregulated markets located overseas, especially in China, and as a result, the price of bitcoins is extremely volatile.

Now the ways of buying and investing in bitcoin are fairly limited: on online exchanges or through a trust that charges premium prices. If the SEC rules in favor of allowing Bitcoin to be publicly traded, this scaling problem could get even worse.

SolidX Partners, a U.S. technology company that provides blockchain services, also filed its ETF application a year ago.

The Securities and Exchange Commission denied the proposed Winklevoss Bitcoin Trust ETF on Friday at around the market's close.

"The Commission notes that bitcoin is still in the relatively early stages of its development and that, over time, regulated bitcoin-related markets of significant size may develop", the decision states. In the SEC's view, Bitcoin exchanges are not yet mature enough to justify opening them to the general public. Our first inclination on the news Friday was to buy more bitcoin, but as we woke up on Saturday and prepared to enter the market, we noticed prices had already recovered.

But the difference is, unlike government-issued currency, bitcoin isn't tied to a specific country, company, or bank. Currently, anyone who wants to trade bitcoin must open a bitcoin account and trade on specific online bitcoin exchanges. Their prices change throughout the day as they are bought and sold. Unlike mutual funds, ETFs trade like common stock on a stock exchange.

While there are two more bitcoin ETF applications still in a review period, the outlook isn't good. If an exchange has sloppy security, or if someone's electronic wallet is compromised, the money can easily be stolen.

Yet this move from the SEC doesn't mean total doom for Bitcoin. Among them, he listed light trading volume, excessive hoarding, extreme price volatility, the difficulty of selling large blocks of bitcoin quickly, high risk of bankruptcy and market manipulation. "Should such markets develop, the commission could consider whether a bitcoin ETF would, based on the facts and circumstances then presented, be consistent with the requirements of the Exchange Act".


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