Published 27 Jul by Cryptodiffer Team
DATA DASH An Open Letter to the SEC about Bitcoin ETFs 26 jul
My name is Nicholas Merton and today I would like to ask the SEC members about the ETF on Bitcoin, as they announced the postponement of the decision for September of this year. Obviously, I'm not the Chief Executive Officer of an investment bank or hedge fund, but I've spent 7 years studying the stock market and trading in crypto-currencies. I just want to express my point of view, why the introduction of ETF will have positive consequences in the future. Namely, how this will help to solve most of the problems recently publicly noted by the SEC.
It is necessary to understand that we are dealing with a new and developing currency market. If we compare it in size with the traditional market of currencies, then on the first one it is up to 200 trillion. dollars, while the capitalization of the crypto-currency market is now only $ 300 billion. Daily trading volumes on the crypto-currency market reach only tens of billions of dollars. Speaking about such a small market, it is worth bearing in mind that it is potentially possible manipulation and insufficient liquidity. There are fears that 1000 people in the world own 40% of the BTC, and that Satoshi Nakamoto owns more than 1 million Bitcoin, which is well-founded and can be supported by evidence when the registry is scrutinized. Many believe that the introduction of ETF and the subsequent arrival on the market of a large number of individual investors will put them at risk associated with high volatility and manipulation. However, "whales" lose market share, and, ETF can stimulate further outflow of money from "whales" and subsequent decentralization.
Let's look at the OTC market (over-the-counter market). I talked about it earlier, discussing the fact that UTS offers opportunities for deals that do not offer exchanges. Over-the-counter market faced by large investors and "whales" (large miners, early investors). The "whales" are concentrated large volumes of Bitcoin, but they can not cash them. They can not sell their assets on the stock exchange, as selling even a small fraction of them will seriously affect the price. Thus, the "whales" are forced to keep the BTC in search of an exit point. On the other hand, in the traditional market, there are a number of institutional investors entering this market and giving their institutional clients access to the crypto-currency market, which they most likely could not do earlier due to lack of liquidity and complexity of using crypto assets. In the end, OTC solves the problems of both sides, as well as the problems of capital distribution and manipulation on the crypto-currency market.
As a man who spent some time in the crypto currency market, I would not like to see the power concentrated in a small number of people. Some distribution is necessary, so that healthy processes and development take place on the market, and everyone could stay on it exactly as much as they want. The introduction of ETFs on Bitcoin provided directly to the BTC will require the withdrawal of a large number of coins from the market and, if they come from whales, the centralization of capital will significantly decrease in favor of its distribution between ETF holders and holders of the interests of the security asset. Thus, we will get rid of the volatility and huge walls for buying/selling, which we see now, as all major transactions will take place on the OTC market.
To summarize, I would like to emphasize once again the need to create and introduce ETFs for both institutional and individual investors. The SEC's main task is to protect individual investors, although many ETFs deliberately avoided this idea. I think that such a step will be more productive than the rejection of ETF. Let me remind you, the SEC accepted the ETF with a 3x shoulder for volatility, pharmacology, and other fairly volatile markets. And I think that it is worth at least to allow individual investors to join the crypto-currency market in order to open a field for experiments to them. I also believe that ETFs on Bitcoin will not be more volatile than the rest of the ETFs. It is necessary to allow the market to develop and attract capital much larger than $ 300 billion.
This highlights is a direct translation from ICODROPS post