After its head of research expressed optimism, the Bitwise bitcoin ETF proposal has been rejected by the U.S. Securities and Exchange Commission.
Like many that came before it, Bitwise's bitcoin exchange-traded fund (ETF) aspirations have fallen by the wayside. This comes just three days after Bitwise's Head of Research told CNBC that "We're closer than we've ever been before to getting a bitcoin ETF approved."
The asset management firm filed this bitcoin ETF proposal in January 2019 in partnership with the NYSE Arca exchange, but that proposal was rejected in a U.S. Securities and Exchange Commission (SEC) letter published on October 9, 2019.
Bitwise's proposal was one of two outstanding filings, after the SEC requested that VanEck/SolidX withdraw its proposal in September 2019. But now, with Bitwise out of the running, Wilshire Phoenix's application with NYSE Arca is the sole proposal left for consideration.
Per usual, the SEC found that the proposal did not meet its burden to guard against market manipulation, a concern that has led the SEC to reject every filing that has crossed its desk.
In an attempt to quell the SEC's concerns, NYSE Arca entered into a so-called exchange surveillance agreement with a regulated futures market, a prerequisite for approval according to the SEC.
Bitwise also attempted to ease the SEC's worries by identifying spot markets with reliable, "real" volume as identified with the methodology that led it to claim that 95 percent of the underlying cryptocurrency spot market is fake.
Rather than help its cause, this move may have actually backfired when the SEC went to make its decision.
"Because, among other things, the Sponsor has asserted that 95 of the bitcoin spot market consists of fake and non-economic activity, but has not established that it has in fact identified the ‘real’ bitcoin market, or that the ‘real’ bitcoin market is isolated from the fraudulent and manipulative activity, we find, in each case, that NYSE Arca has not met its burden to demonstrate that its proposal is consistent with the requirements of Exchange Act Section 6(b)(5), and therefore the Commission disapproves this proposed rule change," the rejection reads.
The Wilshire Phoenix ETF is still up for a decision. But we shouldn't be holding our breath.