The US is still waiting on its first bitcoin ETF. Here’s what experts say the SEC wants to see before giving approval.

Bitcoin.
The SEC has a number of applications for bitcoin ETFs to review.

  • The SEC has started reviewing applications for bitcoin exchange-traded funds, which have yet to launch for trading in the US.
  • The regulator will consider bitcoin’s volatility and market maturity in rendering a decision whether or not to greenlight the products, experts say.
  • The SEC recently pushed back a decision on a bitcoin ETF until at least this summer.
  • See more stories on Insider’s business page.

Bitcoin’s fast-growing popularity, increasingly elevated profile in corporate America and swelling market capitalization above $1 trillion have retail and Wall Street investors alike questioning if and when a bitcoin exchange-traded fund can be traded in the US. Those questions are currently before the Securities and Exchange Commission which is being asked in at least nine applications for the green light to launch what could be the first cryptocurrency ETF in the country.

But a decision may have to wait at least until mid-June. The SEC this week delayed rendering a decision on a bitcoin ETF from asset manager VanEck that, if cleared, would be listed by CBOE Global Markets. The Commission said it was “appropriate” to take more time for consideration.

The arrival of a bitcoin ETF in 2021 would follow this month’s start of trading in shares of Coinbase, the first cryptocurrency exchange to go public, as well as expanding acceptance of bitcoin as payment methods by companies including electric vehicle maker Tesla. Meanwhile, investment bank JP Morgan is preparing to introduce its first bitcoin fund for wealthy clients.

These and other bitcoin developments may signal the increased likelihood that a bitcoin ETF will gain approval, but the SEC has rejected other attempts.

Institutions “are getting in from hedge funds on Wall Street to PayPal, to Venmo, to Visa. So [the SEC] can’t really ignore this because the market is deciding that they want to be involved,” Ian Balina, founder and CEO of Token Metrics, a data-driven cryptocurrency investment research platform, told Insider.

Here are three hurdles and tailwinds that experts say stand in front of the first US bitcoin ETF:

1) Bitcoin volatility

The world’s most widely traded digital asset is well-known for its wild price swings, with gains or losses of 10% during a session not uncommon.

“The SEC has a difficult job balancing the clearly overwhelming desire for the market to have access to BTC via an ETF versus the inherent volatility that the asset class has at this stage in its life cycle,” George McDonaugh, co-founder of digital asset investment firm KR1, told Insider. “Volatility would be one of the major considerations. Bitcoin is very scarce and comparatively still a very young asset class. The volatility should dampen over time but that might be long after the market loses patience waiting for [a bitcoin ETF].”

Price volatility has declined in recent weeks and such moves make bitcoin more appealing to institutions, according to JPMorgan.

Liquidity in the bitcoin market had also been a factor under consideration by the SEC.

“I think it’s less of a concern now [than] in the early days … and a lot of that is tied to institutional players coming into and creating depth and breadth in the market,” Matteo Dante Perruccio, president international of Wave Financial, a US-regulated digital asset manager, told Insider. “If it’s 90% retail investors in an asset and you open it up to a bigger universe of retail investors, I think that’s a really hard decision to make as a regulator. But it helps you have substantive institutional investors trading and involved in investing in it.”

Read more: Binance CEO Changpeng Zhao breaks down how he built the world’s largest crypto exchange in 180 days – and shares why he’s keeping most of his assets in Bitcoin and Binance Coin

2) Market maturity

“It’s fair to say if you look at the denials for the last several ETFs, you can see that there was concern among several of the commissioners that the bitcoin market was not sufficiently regulated and, in their view, was susceptible to manipulation,” and “when I say that I mean that manipulation would show up in prices,” Amy Doberman, a partner in the securities department at law firm WilmerHale, told Insider.

“I think what you’re going to see with the pending requests for approval is an argument that the market is far more developed than it was four or five years ago and that there’s a lot more price discovery available than there was even just a few years ago so that there will be the ability to reference actual trades and sufficient information to develop accurate prices,” said Doberman.

3) What’s on the SEC’s plate

The US lags behind other countries in approving bitcoin ETFs, with Canada this year approving the first publicly traded bitcoin ETF in North America, the Purpose Bitcoin ETF, as well as ethereum ETFs. Brazilian regulators have reportedly approved two bitcoin ETFs.

“People underestimate the Canadian approval,” said Wave Financial’s Perruccio, characterizing as “close cousins” the SEC’s relationship with the Canadian securities regulator. “The regulators have got to be talking a lot and … you always feel more comfortable in company when you are making these bold decisions,” and Canada’s regulator is considered as well-respected, he said. For a US bitcoin ETF, “I feel like it’s inevitable. It’s no longer ‘if’ but ‘when’ and I think the question of when is probably in 2021. That’s my prediction,” said Perruccio.

While bitcoin ETF applications pile up, the SEC and its new chairman Gary Gensler have a range of other issues they are working on. Gensler, who was confirmed as chairman earlier this month, is seen by some bitcoin ETF proponents as a cryptocurrency advocate stemming in part from his teachings at MIT on the subject.

Gensler “will have to decide what he wants to prioritize,” said Doberman. He’s “obviously very knowledgeable about cryptocurrencies and hopefully will bring an additional level of sophistication and appreciation for the currency to the table,” she said.

During his confirmation hearing, Gensler said the SEC under his watch would review issues surrounding protection and fairness for retail investors in the backdrop of “gamification” on trading apps and platforms.

The agency is reportedly considering stricter rules to rein in projections made by special purpose acquisition companies, or SPACs, and reportedly has opened a preliminary investigation into leveraged trades at the Archegos Capital Management hedge fund that collapsed in March.

While he’s well-versed in the subject of cryptocurrencies, Gensler, who served as a chairman of the Commodity Futures Trading Commission under the Obama administration, will not just wave through bitcoin ETFs applications without scrutiny, said Noah Hamman, CEO of AdvisorShares, a firm that offers actively managed exchange-traded funds through its AdvisorShares Trust.

Gensler will be in the role “of looking at the rules and regs and deciding if either, one, something fits or two, do the rules and regs need to be modified to allow it to fit because it makes sense and it’s the right thing to do,” said Hamman. AdvisorShares does not have a bitcoin ETF filing with the SEC.

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Peloton Tread+ owners should immediately stop using the fitness equipment, following reports of a child’s death and other injuries, regulators say

Peloton Tread Slideshow
Peloton is under pressure to conduct a safety recall.

  • The urgent Peloton Tread+ warning comes after 39 incidents in which children or a pet were trapped.
  • One child died, the company revealed in March.
  • Peloton called the CPSC warning “inaccurate and misleading.”
  • See more stories on Insider’s business page.

Consumer safety regulators issued an urgent warning on Saturday to people who own a Peloton Tread+, saying they should stop using the equipment after one child died and multiple others were injured after being sucked under the machine.

The US Consumer Product Safety Commission (CPSC) said the agency was aware of 39 incidents in which children and one pet got trapped under the machine.

In statement, it said: “CPSC staff believes the Peloton Tread+ poses serious risks to children for abrasions, fractures, and death. In light of multiple reports of children becoming entrapped, pinned, and pulled under the rear roller of the product, CPSC urges consumers with children at home to stop using the product immediately.”

On Friday, the Washington Post reported that federal regulators have been pressuring Peloton to conduct a safety recall of its $4,295 treadmill.

Peloton on Saturday refuted the CPSC claims in a statement. It said: “The company is troubled by the Consumer Product Safety Commission’s unilateral press release about the Peloton Tread+ because it is inaccurate and misleading.”

It added: “There is no reason to stop using the Tread+, as long as all warnings and safety instructions are followed. Children under 16 should never use the Tread+, and Members should keep children, pets, and objects away from the Tread+ at all times.”

The Peloton Tread+ went on sale earlier this year, promising to offer runners the same “private fitness studio” experience enjoyed by users of its indoor bicycle. The Peloton Tread+ is similar to most treadmill machines, with its main differentiator being the smart screen and content library of live and recorded workout classes.

In March, Peloton CEO John Foley emailed owners of the Tread+ to inform them of a “tragic accident involving a child” and the machine, “resulting in, unthinkably, a death.”

To prevent future such accidents, he recommended adults removed the safety key after use, which would prevent the machine from operating.

“While we are aware of only a small handful of incidents involving the Tread+ where children have been hurt, each one is devastating to all of us at Peloton, and our hearts go out to the families involved,” Foley said at the time.

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David Einhorn says Chamath Palihapitiya and Elon Musk were the ‘real jet fuel’ for the GameStop short squeeze – and that regulators have been defanged when it comes to policing markets

elon musk bernie sanders space
  • Greenlight Capital’s founder David Einhorn took shots at Elon Musk and Chamath Palihapitiya in his quarterly investor letter published Thursday.
  • Einhorn said securities laws surrounding stock manipulation “don’t apply” to Musk.
  • The hedge fund manager also said Palihapitiya’s GameStop tweets and options trades may have helped him “harm a competitor” in Robinhood.
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GreenLight Capital’s David Einhorn believes billionaires Chamath Palihapitiya and Elon Musk were “the real jet fuel” for the GameStop short squeeze and that regulators have been defanged when it comes to policing markets.

In a letter to investors released on Thursday that discusses his firm’s first-quarter results, Einhorn ripped into Chamath Palihapitiya, Elon Musk, and US securities regulators.

Einhorn said there’s “no cop on the beat” to regulate equities these days and argued “quasi-anarchy appears to rule” the markets.

“Many who would never support defunding the police have supported – and for all intents and purposes have succeeded – in almost completely defanging, if not defunding, the regulators,” Einhorn wrote.

Einhorn added that he believes the GameStop short squeeze that occurred at the start of 2021 was fueled in large part by billionaires Chamath Palihapitiya and Elon Musk.

“We note that the real jet fuel on the GME squeeze came from Chamath Palihapitiya and Elon Musk, whose appearances on TV and Twitter, respectively, at a critical moment further destabilized the situation,” Einhorn wrote.

The GreenLight Capital founder said Palihapitiya may have had an incentive to harm his competitor Robinhood when he tweeted out “let’s goooooo!!!!” after buying February $115 calls on shares of GameStop back on January 26.

“Mr. Palihapitiya controls SoFi, which competes with Robinhood, and left us with the impression that by destabilizing GME he could harm a competitor,” Einhorn wrote.

Read more: BTIG identifies 14 beaten-down stocks poised to dominate the market this earnings season and extend their track record of crushing expectations

Palihapitiya did donate all of his gains in GameStop and the initial capital for the investment to Barstool founder Dave Portnoy’s charity, but the billionaire was active in defending the Reddit trader movement that pushed GameStop shares higher.

Palihapitiya appeared on CNBC on January 27 and said the GameStop phenomenon was an example of individual investors pushing back against the Wall Street establishment.

Einhorn went even further with his critiques of Elon Musk in his letter to investors.

The GreenLight Capital founder said that if regulators wanted Elon Musk to stop manipulating stocks, they should have hit him with more than a “light slap on the wrist when they accused him of manipulating Tesla’s shares in 2018.”

“The laws don’t apply to him and he can do whatever he wants,” Einhorn added.

Einhorn also said Michael Burry’s exit from Twitter after the SEC visited him at his home was an example of his decision to “stop publicly speaking truth to power.”

The fund manager’s quotes about GameStop certainly stick out, though the fund’s performance is also noteworthy for its loss in the quarter. Einhorn’s funds returned -0.1% in the first three months of 2021, compared to a 6.2% return for the S&P 500 index.

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