Alternative Investments: February 26 is the D-Day for the Wilshire Phoenix Bitcoin ETF

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Will the SEC greenlight the Wilshire Phoenix Bitcoin ETF?

Crypto market participants seem to be unanimous in their opinion that the SEC will reject the Wilshire Phoenix bitcoin ETF. The SEC is due to deliver its decision on Wednesday, February 26. (Bitcoinist)

According to Jake Chervinksy, General Counsel for Compound Finance, it’s nearly a certainty that the SEC would reject the Wilshire Phoenix proposal.

Three bitcoin ETF hopefuls

There are currently three applications with the SEC for a bitcoin ETF. These are from Kryptoin, Crescent Crypto and Wilshire Phoenix.

According to CoinDesk, Wilshire filed an amended S-1 as recently as February 14, indicating the firm’s efforts to engage with the SEC and boost the chances of its application.  In fact, Wilshire managing partner William Herrmann went so far as to tell CoinDesk that he was optimistic about the filing.

Further, SEC Commissioners Hester Peirce and Allison Herren Lee both met with representatives from Wilshire Phoenix, NYSE Arca and their law firms. However, despite that, the SEC remains non-committal on the issue.

Wilshire has filed for an ETF that will automatically rebalance itself between US Treasury Bonds and bitcoin. This is a device to counter the volatility in the price of bitcoin, and therefore reduce risks for investors.

The SEC’s concerns

The SEC has rejected a host of applications over the past couple of years. Its main concerns are the following:

  • Valuation should be determined with reference to pricing on multiple exchanges
  • Liquidity of bitcoin may prove to be inadequate to support a full-fledged ETF
  • Custody – safety, technology
  • Arbitrage should enable proper price discovery at multiple exchanges. The failure of a single exchange should not affect the price or prevent arbitrage
  • Market manipulation

The last-mentioned bullet is the one that perhaps worries the SEC the most.

“In their denial of other ETPs, the SEC has consistently highlighted their desire to see a regulated market of significant size that includes surveillance sharing agreements to monitor manipulative activities,” Crescent Crypto Asset Management co-founder Christopher Matta told Cointelegraph.

What if Wilshire gets approved?

A bitcoin ETF would be hugely attractive for both institutional as well as retail investors. It will be a means to invest in the cryptocurrency without the risks and hassles of physically owning it.

An SEC approval could, therefore, spark a rally in bitcoin.

Related Story: Bitcoin ETFs and SEC: ‘Last Man Standing’ Wilshire Phoenix Amends Bitcoin Filing                                                 

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