The US Security and Exchange Commission (SEC) under the leadership of Chairman Jay Clayton will never approve a bitcoin exchange-traded fund (ETF), believes Jake Chervinsky of New York-based Kobre & Kim, LLP.

The general counsel noted that Clayton and his team look at bitcoin as an asset that remains “susceptible to manipulation and surveillance-sharing agreements.” So no matter how the ETF backers decorate their applications, the SEC officials would continue to reject them under the guise of the Exchange Act.

“Clayton’s term ends on June 5, 2021, but could go another 18 months longer,” added Chervinsky. “Usually, we’d see new ETF proposals filed immediately after rejection, but it might be time to take a year off.”

Depends. If the SEC adopted Commissioner Peirce's view on the Exchange Act, then manipulation in underlying markets would be irrelevant. The only issue would be manipulation of the ETF itself: https://t.co/PTVF8Act4l — Jake Chervinsky (@jchervinsky) October 10, 2019

The statements came around right after the SEC rejected the Bitcoin ETF application filed by Bitwise Asset Management in partnership with NYSE Arca. The order reiterated that both NYSE Arca, in particular, failed to respond to their concerns related to price manipulation or other illegal activities. It read:

“The Commission is disapproving this proposed rule change because, as discussed below, NYSE Arca has not met its burden under the Exchange Act and the Commission’s Rules of Practice to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and, in particular, the requirement that the rules of a national securities exchange be ‘designed to prevent fraudulent and manipulative acts and practices.’”

Non-Event

SEC’s latest decision on Bitcoin ETF asserted its conservative approach towards emerging assets. The move left a large portion of cryptocurrency enthusiasts disappointed, with many calling on to appoint Hester Peirce as the next chairman. The republican SEC commissioner was only among the five to have supported a Bitcoin ETF.

Meanwhile, the other section of the cryptocurrency community saw the news as a non-event – something that does not impact the performance of bitcoin as both technology and investable asset. Market analyst Alex Krüger exemplified it with bitcoin’s unfazed price performance after the ETF rejection.

The Bitwise ETF proposal was in many ways similar to the new Bitfinex/Tether lawsuit. Both presented facts through a heavily stained glass. The SEC rejection should have been fully priced in. A non-event. https://t.co/OCNlQu7F2N — Alex Krüger (@krugermacro) October 9, 2019

Nevertheless, an approved Bitcoin ETF could have opened a floodgate of investors towards bitcoin. A study conducted by Tom Alford at TotalCrypto.io predicted a 500 percent price rally in the bitcoin market upon an ETF approval after analyzing the gold market.

“ETF kick-started the biggest bull run in gold’s history. Prices rose from just $331.60 per ounce to a high of $1,917.90. That’s an incredible 478% increase in price after the gold ETF was launched,” reasoned Alford.

Bad Bitcoin ETF Application

Rptr45 in a long thread showed how Bitwise shot itself in the foot after releasing its renowned “Real 10” report. Published earlier this year, the study noted that 95 percent of bitcoin spot market volume is fake and is open to price manipulation.

“There’s a good chance any new application must prove what Bitwise stated with their 95% study is WRONG before they can even get them comfortable that the underlying spot market isn’t subject to manipulation and look to approve an ETF,” wrote Rptr45.