Cryptocurrencies have done horribly over the past year, and 2019 isn't shaping up to be much better for bitcoin and other major tokens. After showing signs of life earlier this month, Bitcoin has fallen back toward its lowest levels since mid-2017, and many investors have moved on to promising investing themes in other areas.

Many proponents of crypto investing have argued that once mainstream investors had a familiar, reliable way to invest in bitcoin, such as an exchange-traded fund tied to the cryptocurrency, prices would rebound. Yet long-awaited bitcoin ETFs have yet to emerge, with a host of issues having prevented them from reaching the financial markets. The latest obstacle came in the form of the partial government shutdown, and it just led to the withdrawal of the final remaining bitcoin ETF proposal before the U.S. Securities and Exchange Commission. Many now believe that it could a year or more before a bitcoin ETF tries to move forward again -- and more skeptical investors think that the shutdown might just have eliminated any chance that bitcoin ETFs will ever get onto major U.S. stock exchanges.

The last bitcoin ETF proposal standing just got pulled

On Jan. 22, the Cboe BZX Exchange withdrew a proposed rule change that would have allowed it to list and trade shares of the SolidX Bitcoin Shares ETF, to be issued by the VanEck SolidX Bitcoin Trust. Cboe BZX had filed the proposed rule change back in June 2018, but the SEC asked for more time in August to consider the proposal. After some minimal action in September, the SEC again delayed consideration in early December.

Those following the proposal noted that the SEC had until late February to make a final decision on the filing. The problem, though, is that the government shutdown has suspended most nonessential operations at the SEC, including the review of proposed rule changes like Cboe BZX's.

VanEck is still interested in pursuing the bitcoin ETF, having referred to the withdrawal of the application as temporary. The fund manager's CEO said in a CNBC interview that VanEck had been discussing various issues surrounding the proposed crypto fund with regulators, but the shutdown put an end to those discussions. With outstanding issues including addressing custody of cryptocurrency held by the ETF and the risks of market manipulation, VanEck chose to withdraw the application with the intent of refiling once government operations return to normal and the SEC has had a chance to catch up.

Holding still on bitcoin ETFs

The move left the SEC with no active bitcoin ETF proposals pending. It's the first time since 2017 that that's been the case, and it doesn't look as if that state of affairs is likely to change soon -- for a couple of reasons.

On one hand, those who want to file brand-new applications for bitcoin ETFs see little reason to do so while the shutdown is ongoing. Without any reasonable expectation for action, starting the timeline is only asking for a curt denial if the SEC doesn't end up having time or resources to consider an application fully.

Meanwhile, there are several bitcoin ETF proposals that have already been rejected by SEC staff members but are pending review from the full commission. The same deadlines for initial consideration don't apply to review requests following a rejection, and no reviews will happen as long as the shutdown lasts.

What it'll take for a bitcoin ETF to go live

Pessimists think that the latest setback could prove to be the death knell for bitcoin ETFs, but others see more reason for hope. In some ways, the poor performance in the cryptocurrency markets is a good thing, as it will give evidence that the SEC can use in assessing how bitcoin behaves under conditions other than the euphoric rush that prompted many ETF filings in the first place. If bitcoin avoids market manipulation and if participants in the crypto markets can come up with ways to ensure trading liquidity and secure custody, then the SEC might well be satisfied enough to allow a bitcoin ETF in the future.

Given how much interest there remains in cryptocurrencies despite their price slump, attempts to get bitcoin ETFs approved aren't likely to cease forever. But it remains unclear whether any will get approved, and for now, all plans for investors to have access to bitcoin via an ETF remain on hold.

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