Price action shows bitcoin not ready for bitcoin ETF?

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Bitcoin took a significant nosedive in price yesterday, on February 24th. Such a convincing move downward, after bitcoin labored for days to move up in price, might just show bears are still in control of the market. One of crypto’s most influential YouTubers thinks bitcoin might not be ready for an exchange-traded fund (ETF).

Bitcoin price

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In a powerful move, bitcoin dropped from a price of about $4,187, down to about $3,716. A price correction might have been expected after several days of positive price action. The force of the move downward, however, showed bears might still have the edge in this market.

Bitcoin not ETF-ready?

Nicholas Merten, host of one of YouTube’s top crypto channels – DataDash – thinks bitcoin’s price action continues to show the asset might not be ready for an ETF, according to his February 24 video.

Pointing to bitcoin’s recent price action, Merten referenced bitcoin’s lack of overall volume. “Within just an hour, 4,600 bitcoin in volume was able to win this much price decline in the market,” Merten said about bitcoin’s recent large price drop. Merten did note that such volume was stated according to Coinbase’ chart, and that other exchange volumes should be taken into account as well.

This is why we’re not going to see a bitcoin ETF for a very long time. Take that from me, who’s been a proponent of a bitcoin ETF since all the way back during, I’ve been a proponent for a while, but I was someone talking about my confidence for one back in summer of 2018.

Merten said the Securities and Exchange Commission (SEC), as well as other regulators, see bitcoin as too volatile. He referenced bitcoin’s lack of liquidity and its 24/7 trading hours. He also talked about bitcoin in reference to unreliable exchanges, as opposed to institutional reliability and framework.

Monitoring the vast number of global crypto exchanges is very difficult, leading to extreme volatility, Merten explained.

If one or two exchanges is letting people go ahead and do something like wash trading, or they’re allowing people to do this kind of price manipulation on such thin capital, you’re going to continue seeing this, and it is going to ruin a lot of retail investors who get in on an ETF. This is why regulators are so hawkish on it.”

The host did further mention that certain ETFs already in existence may be more risky than a bitcoin ETF.

A bitcoin ETF might actually help

Bitcoin’s current state is almost a catch-22 situation in some ways. It seems as though regulators may not approve a financial product (ETF) that might actually solve some of the issues regulators are hesitant on. Merten thinks a bitcoin ETF might resolve many of the mentioned issues affecting crypto’s largest asset.

November 2018 saw SEC chief Jay Clayton express his concern regarding bitcoin manipulation. Previous delays regarding one of the most notable ETFs, the VanEck-SolidX bitcoin ETF, resulted from the SEC’s investigation into such manipulation. Merten mentioned two of the SEC’s top concerns as price manipulation and lack of liquidity. The market likely will continue to see such manipulation until increased volume comes in.

Wouldn’t it be great if we could take a lot of the bitcoin that is owned by bitcoin whales abroad, and put that into an ETF owned by millions of people, and not to mention, take away a lot of that bitcoin which could be used to dump on the open exchanges that are already suffering from low liquidity. Not to mention, bring a lot of excitement into trading cryptocurrencies on these retail exchanges because an ETF is coming.”

Although a bitcoin ETF might improve the situation if approved soon, Merten does not think the SEC will go that direction. He thinks regulators will wait for the market to turn around and prove itself, or someone possibly will delve into a synthetic option that is somehow free from some of the mentioned exchange volatility.

As far as bitcoin’s recent price move downward is concerned, Merten explained it may have been a few people dumping the price while utilizing margin trading. He also thinks price will eventually revisit the lower $3,000 range, forming a double bottom.

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