Representatives from SEC made it clear that the decision did not rest on the judgement whether bitcoin constitutes an asset with value or not. Instead, it was aimed at protecting the investors from fraud. According to SEC, the proposal of Winklevoss brothers was not “consistent with the requirements of the Exchange Act Section 6(b)(5), in particular the requirement that its rules be designed to prevent fraudulent and manipulative acts and practices.” This reasoning is very similar to the one offered by the commission last year when it rejected the first proposal from the brothers. There is still a chance that we will see a digital currency based ETF on regulated exchanges soon. Besides brothers Winklevoss, there are others who are seeking the SEC’s approval for this purpose. VanEck and SolidX have both submitted similar proposals to the commission and are awaiting a response in the coming months. While the rejection of Winklevoss’s proposal does not bode well for these proposals, they differ in structure. Furthermore, SEC left the discussion on crypto ETFs open when it commented that “over time, regulated bitcoin-related markets may continue to grow and develop.”
The news of SEC’s decision caused a sell-off in bitcoin and drove down the price below $8,000 once more. It was only a few days ago that bitcoin price broke $8,000 and many investors were hoping that the coin would establish a new support line at that mark. After the news on SEC’s rejection of a bitcoin ETF proposal broke, the prices quickly dropped 3% and fell from $8,300 to $7,970. Many crypto enthusiasts attributed the drop in price to market manipulation by media websites as many channels covered the SEC’s decision.