With the unprecedented wave of institutions adopting Bitcoin, regulatory backing seemed like the next step. The appointment of Gary Gensler, former MIT professor on cryptocurrencies and blockchain technology, as Chairman of the Securities and Exchange Commission (SEC) strengthened this idea.
However, as Bitcoinist reported earlier, the new SEC administration could continue its stand against BTC as a legitimate investment. In a warning statement to investors, the Division of Investment Management (IM) Staff claims that Bitcoin and the BTC futures market carried a high risk.
They called BTC a “highly” speculative investment with high volatility and “lack of regulation” with potential to fraud and manipulation. Statements familiar to everyone involved in the crypto space for the past years. Contrary to expectations, they suggest a negative perception towards Bitcoin and cryptocurrencies.
The IM Staff and the Division of Economic and Risk Analysis and Division of Examinations claim that they will monitor mutual funds’ investments in BTC Futures. In doing so, they seek to track and analyze this market’s efficiency and fairness. The IM added the following:
staff encourages any closed-end fund that seeks to invest in the Bitcoin futures market to consult with the staff, prior to filing a registration statement, about the fund’s proposed investment, anticipated compliance with the Investment Company Act and its rules, and how the fund would provide for appropriate investor protection.
How The Grayscale Bitcoin Trust Could Benefit
The IM Staff statement was review by many experts. They reached different conclusions. While some believe a closer scrutiny on BTC and its market could be positive in the long-term for regulatory approval, other claimed that the SEC is sending a straightforward message.
Senior ETF Analyst for Bloomberg Intelligence Eric Balchunas said that the SEC is telling investors to stick to the Grayscale Bitcoin Trust (GBTC), one of the few institutional investments products in the U.S. that provides BTC exposure.
Balchunas speculates that the IM Staff statement is part of a strategy to win some time and offset part of pressure that has been building up for the regulator to approve a Bitcoin ETF. At least 9 of these ETFs petitions have been filed with the SEC suggesting high institutional interest in this product. Balchunas said:
All that said, I have a pet theory that this is partially a way of buying a little time and space from the mounting pressure and filings = 2021 isn’t dead yet, but it just took a nasty blow to the head.
In the meantime, the GBTC has been suffering in the past few months due to the launched of BTC-based ETFs in Canada and possibly the expectation of an “imminent” Bitcoin ETF in the U.S. With the SEC apparently going the opposite way, Grayscale product could benefit, but so BTC’s price.
Last year, Grayscale was one of the most important BTC buyers and contributors. The firm have a daily average purchase of around 1,500 BTC in December 2020. The GBTC went from $20 billion with assets under management to around $40 billion, at its peak. The statement from the SEC could trigger a new Grayscale “buying frenzy”. Thus, putting pressure on BTC’s price to rise.
At the time of writing, Bitcoin trades at $54,615 with a 3.7% loss in the daily chart and a 1.9% profit in the weekly chart.