Markets Don’t React To ETF Denial

Are Traders Ambivalent At This Point?

Following the 9 ETF rejections yesterday, the market has essentially flatlined as it struggles to find strong feelings either way.

Bitcoin has only fluctuated in price by ~$10 for the majority of the past 24 hours. Volume has been dropping ever since the SEC news dropped.

Truly, this is a very different reaction to the absolutely dismal emotions we encountered following the VanEck ETF denial.  

So, what’s going on?

Where’s the massive sell-off? After all, the SEC wiped out nearly every ETF application on the table in one fell swoop.

Bitcoin shorts have been rising since the Bitmex scheduled maintenance. Where’s the massive short squeeze?

In addition to yesterday’s SEC announcement, China’s lawmakers also came out with a new policy to strengthen the regulation of cryptocurrency trading and initial coin offerings (ICOs). In addition, they are seeking to block access to 124 foreign crypto exchanges.

They also cracked down on crypto payments using popular payments services such as Alipay.

So, the market’s reaction is to do nothing at all?

Seriously, what’s going on?

For one, despite the record number of short positions, investors were better prepared for the SEC’s announcement this time. The VanEck / SolidX ETF delay and the Winklevoss ETF denial both took the market by surprise because the narratives had a different view, but the market was much better prepared for this.

Quite simply, people are starting to accept that we don’t need an ETF.

Reading back through the decision delivered yesterday, one of the stated reasons was that “unidentifiable participants can influence the market”. Given the unregulated and pseudo-anonymous state of the market, the SEC setting the bar so high such that market manipulators must be identified puts the ETF application in a very precarious position.

Cryptocurrency is pseudo-anonymous, and in some cases fully anonymous, which is not going to change anytime soon.

What is more likely to happen at this point is that the crypto markets will evolve and adapt to these circumstances.

This space wasn’t reliant on Satoshi Nakamoto, this space wasn’t reliant on Mt.Gox, this space wasn’t reliant on big banks and big government, and this space has never needed anyone’s approval to justify its existence.

Precious metals are manipulated every day through paper markets and the SEC seems fine with that. Currencies and bonds are manipulated through central banks as well and the SEC seems none the wiser. Setting the bar of anti-anonymity so high on a currency that is truly worldwide and discretionary by design is a foolish position to take.

ETFs will do to BTC what they’ve done to gold — artificial inflation by paper shares.

Bitcoin’s major selling point is that it has a limited supply and it is deflationary.

We know from gold’s paper market that there are far more shares of gold than actual bullion they’re based on, creating an artificial inflation especially in times of uncertainty, like we saw in the post-2008 market.

But gold and Bitcoin differ vastly on a basic principle — gold can flourish as a stable asset because the majority of people don’t try to trade their shares for the underlying asset.

Meanwhile, Bitcoin is inherently a free-market vehicle and has a very limited delivery schedule.

So we find ourselves in a position of uncertainty, which is clearly reflected in today’s markets.  

I do think the ETF is an eventuality, but by the time we actually see it approved, it will matter a whole lot less than how much the market supposedly needs it today.

What we’ve seen time and time again with Bitcoin and the crypto space is that when confronted by adverse odds, we find ways of adapting to the changing circumstances.

If you’ve only been in the space for a little while, watch it closely because it may surprise you.

In 6 months we might even look backward and laugh about how much we thought we “needed” the ETF and how different the market has become.

This is a space that embraces change and chaos, so you need to learn to subvert your expectations, or the market may do that for you.

Whatever the case, hopefully over the next month we can return to discussing developments in the underlying technology, interesting projects that are rising stars in the space, and real tangible improvements to existing solutions.

Wouldn’t that be nice?

Mark your calendars for this Thursday evening! We’re going to hold a special one-hour session on “Top Ten Ways to Create Passive Income With Crypto.” This session will be held Thursday at 8pm EDT (New York) and of course, we will provide a link to a replay session if you cannot attend. Sign up here to get the live session where we answer your questions!

We’ve started to produce episodes for The ReadySetCrypto Podcast; all of our episodes are posted on our blog (and on iTunes) and Episode Ten is now available. Episode Ten speaks to this whole notion of “Buy The Dip” and whether or not that is sage advice for today’s market. Look for more episodes shortly as we comb the crypto space for valuable interviews, and create valuable content to keep you in the loop!

See you tomorrow!

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Defensive Actions for the next trading day: 

• None.