Bitcoin Bounces as Traders Seek Silver Lining in SEC ETF Denial

(Bloomberg) -- Cryptocurrency traders don’t know who to believe in the long-running battle to create an exchange-traded fund that invests in Bitcoin.

Less than 24 hours after the U.S. Securities and Exchange Commission fueled a slump in the virtual currency by rejecting plans to list such a fund, Bitcoin rallied as Commissioner Hester Peirce expressed support for cryptocurrency ETFs in an interview with Bloomberg Radio. Peirce dissented from the SEC decision on Thursday.

Bitcoin’s roller-coaster ride follows a frenzy of speculation on the prospects for an ETF that’s helped the largest virtual currency rise more than 30 percent since the start of July. Those hopes turned to disappointment on Thursday when the SEC denied an exchange’s request to list a cryptocurrency ETF run by Tyler and Cameron Winklevoss for a second time. At least four other companies are still awaiting decisions on whether their Bitcoin funds can list.

“This is a big shot across the bow for those seeking to launch digital currency exchange-traded products,” said Barry Pershkow, a partner at Chapman & Cutler LLP who used to work at the SEC. “You don’t write 92 pages and undertake serious economic analysis unless you’re trying to make a really important statement.”

Long Haul

Other listing applications will likely be denied on similar grounds or pulled by the exchanges, he said, adding it’ll likely take two or three years for someone to try to address the commission’s concerns.

But the SEC’s decision didn’t damp traders’ enthusiasm for long. After slipping to as low as $7,793.02 on Friday, Bitcoin rebounded past $8,000 as Peirce detailed why she supported a Bitcoin ETF on Bloomberg Radio.

“As regulators, our rule is not to judge the value of what an investment is, it’s to give people the opportunity to make those judgments themselves," Peirce said on the Bloomberg Markets AM show. The proposed fund “would allow institutions to play a bigger role in the Bitcoin market, which I think would be good for the market and be good for retail investors as well."

Peirce was the only commissioner to vote in favor of allowing the Winklevoss fund; SEC Chairman Jay Clayton and the agency’s two other commissioners all voted to block the listing request.

The Winklevoss twins will see if the third time is the charm, saying in a statement Thursday that they plan to continue to work with the SEC and are committed to winning approval of a Bitcoin ETF.

--With assistance from Lisa Abramowicz.

To contact the reporters on this story: Olivia Schaber in New York at oschaber1@bloomberg.net;Rachel Evans in New York at revans43@bloomberg.net

To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net, ;Jeremy Herron at jherron8@bloomberg.net, Randall Jensen

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