Can the First Bitcoin ETF Increase Volatility in the Crypto Market?
In the last months there has been a dominant topic in the crypto community, the approval of a Bitcoin exchange traded fund, commonly known as ETF. At the beginning of August, the U.S. Securities and Exchange Commission (SEC), decided to delay the approval of the VanEck SolidX Bitcoin ETF, a decision that was awaited by enthusiasts.
However, there are some experts that explained that the ETF may increase volatility in the market.
At the beginning of August, Bitcoin moved from $7,000 to $8,000 due to the increased hype around Bitcoin ETFs. Since then, and after the SEC rejected the Bitcoin ETF, the price of bitcoin dropped reaching $6,000 dollars.
The cryptocurrency researcher and expert, Andreas ANtonopoulos, said that he is against the introduction of a Bitcoin ETF in regulated markets. He explained that this investment tool would open the door for traditional investors and retail traders to enter the market and start trading the famous virtual currency.
Moreover, he explained that there is a very big chance that the market will be manipulated and will be much more volatile than what it is now.
About it he commented:
“Everybody is so excited about ETFs. What we have seen in other markets is that when an ETF becomes available, the price really increases dramatically, as suddenly that commodity becomes available to a lot more investors and these investors pile on. But, the other side of it, is that there are always these claims that the commodities markets are heavily manipulated and opening up these ETFs only increase the ability of institutional investors to manipulate the prices of commodities.”
One of the main concerns of the SEC about deciding to delay a Bitcoin ETF was related with the fact that the market is still not mature and that there are some reports about being manipulated.
It is possible to see a sudden increase in the price of Bitcoin if the ETF proposal of the Chicago Board Options Exchange (CBOE) and VanEck-SolidX is approved by the SEC. In the ETF market, investors do not necessarily have incentives to bring down the price of the famous virtual currency. Instead, it can be used to manipulate the price of Bitcoin to register gains in the futures market. If this happens, the Bitcoin market could become even more volatile than now.
In the long run, if there are more investment tools and investors, the volatility in the crypto market would be reduced, increasing the chances of the SEC to approve an ETF. If the liquidity is increased, it would be more difficult for an investment instrument to have an influence on Bitcoin prices.