We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Facebook Crypto Plan on Rocky Ground: ETFs Under Pressure
Read MoreHide Full Article
Bitcoin had a strong spell this year, having gained about 111.6%. However, it lost momentum since the second half of the year, plummeting about 47% since late June. Inthe past month, it lost about 12.2%.
The long-standing SEC-decision of not approving the cryptocurrency has led to volatility in the space. However, pressure seems to be mounting after Facebook (FB) CEO Mark Zuckerberg, in testimony before Congress, expressed concerns about “whether the company's cryptocurrency project Libra was going to work.” Bitcoin slipped to its lowest on Oct 23 against the dollar since the middle of May.
Facebook startled the investing world, regulators and lawmakers on Jun 18 with its announcement of launching its own digital coin, Libra, in 2020. Facebook’s announcement contributed to a meaningful crypto rally in late June when bitcoin prices touched the $13,800 mark.
Though uncertain about the future and viability of the Libra project, Zuckerberg “sought to reassure lawmakers that Facebook would not back any move by the crypto project, which comprises a consortium of 21 members including venture capital firms and nonprofits, to launch the digital currency until it had satisfied all U.S. regulatory concerns.” Per some analysts, the Libra project may never be a reality and might even upend the entire cryptocurrency space.
Regulatory Hurdle
Pressure from regulators is not new for bitcoin. The SEC hasn’t said yes to any ETF launch proposal on bitcoins so far. SEC is worried about the extreme price volatility in cryptocurrencies and liquidity in bitcoin-related funds. Per Reuters, the virtual currency can be deployed to quickly move money anywhere in the world without any central authority’s intervention, such as a bank or government. The market is pretty unregulated at the current level.
Not only this, probably sensing another likely SEC disapproval, CBOE BZX Exchange withdrew its VanEck/SolidX bitcoin ETF proposal on Sep 13. The news went out on Sep 17 through a notice published by the SEC. Investors should note that the latest proposal for a bitcoin ETF was Van Eck’s third attempt.
The decision of withdrawing the proposal came just weeks after Van Eck began offering a limited Bitcoin ETF for institutions. In fact, the limited version of bitcoin ETF failed to garner enough response from the market (read: Top ETF Stories of September).
Overvaluation Concerns in Crypto Space?
Despite the absence of any material progress, the crypto space has gained materially this year. So, some overvaluation concerns are definitely associated with it. Charles Hayter, CEO of CryptoCompare, pointed out that "we have seen weakening volumes and regulatory tightening from a number of jurisdictions" lately.
ETFs That May Feel the Pressure
Blockchains are related to bitcoins. Per a source, “the blockchain in Bitcoin literally acts a ledger; it keeps track of the balances for all users and updates them as money changes hands.”So, blockchain ETFs like Reality Shares Nasdaq NexGen Economy ETF (BLCN - Free Report) , Amplify Transformational Data Sharing ETF (BLOK - Free Report) and First Trust Indxx Innovative Transaction & Process ETF (LEGR - Free Report) may deal with some pressure on the Facebook news.
Investors should note that mining of cryptocurrencies involves the usage of semiconductors. So, if the cryptocurrency space takes a hammering, investors may see pressure on semiconductor ETFs like Semiconductor Vaneck Vectors ETF (SMH - Free Report) , Invesco Dynamic Semiconductors Portfolio (PSI - Free Report) and SPDR S&P Semiconductor (XSD - Free Report) (see all technology ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Facebook Crypto Plan on Rocky Ground: ETFs Under Pressure
Bitcoin had a strong spell this year, having gained about 111.6%. However, it lost momentum since the second half of the year, plummeting about 47% since late June. Inthe past month, it lost about 12.2%.
The long-standing SEC-decision of not approving the cryptocurrency has led to volatility in the space. However, pressure seems to be mounting after Facebook (FB) CEO Mark Zuckerberg, in testimony before Congress, expressed concerns about “whether the company's cryptocurrency project Libra was going to work.” Bitcoin slipped to its lowest on Oct 23 against the dollar since the middle of May.
Facebook startled the investing world, regulators and lawmakers on Jun 18 with its announcement of launching its own digital coin, Libra, in 2020. Facebook’s announcement contributed to a meaningful crypto rally in late June when bitcoin prices touched the $13,800 mark.
Though uncertain about the future and viability of the Libra project, Zuckerberg “sought to reassure lawmakers that Facebook would not back any move by the crypto project, which comprises a consortium of 21 members including venture capital firms and nonprofits, to launch the digital currency until it had satisfied all U.S. regulatory concerns.” Per some analysts, the Libra project may never be a reality and might even upend the entire cryptocurrency space.
Regulatory Hurdle
Pressure from regulators is not new for bitcoin. The SEC hasn’t said yes to any ETF launch proposal on bitcoins so far. SEC is worried about the extreme price volatility in cryptocurrencies and liquidity in bitcoin-related funds. Per Reuters, the virtual currency can be deployed to quickly move money anywhere in the world without any central authority’s intervention, such as a bank or government. The market is pretty unregulated at the current level.
Not only this, probably sensing another likely SEC disapproval, CBOE BZX Exchange withdrew its VanEck/SolidX bitcoin ETF proposal on Sep 13. The news went out on Sep 17 through a notice published by the SEC. Investors should note that the latest proposal for a bitcoin ETF was Van Eck’s third attempt.
The decision of withdrawing the proposal came just weeks after Van Eck began offering a limited Bitcoin ETF for institutions. In fact, the limited version of bitcoin ETF failed to garner enough response from the market (read: Top ETF Stories of September).
Overvaluation Concerns in Crypto Space?
Despite the absence of any material progress, the crypto space has gained materially this year. So, some overvaluation concerns are definitely associated with it. Charles Hayter, CEO of CryptoCompare, pointed out that "we have seen weakening volumes and regulatory tightening from a number of jurisdictions" lately.
ETFs That May Feel the Pressure
Blockchains are related to bitcoins. Per a source, “the blockchain in Bitcoin literally acts a ledger; it keeps track of the balances for all users and updates them as money changes hands.”So, blockchain ETFs like Reality Shares Nasdaq NexGen Economy ETF (BLCN - Free Report) , Amplify Transformational Data Sharing ETF (BLOK - Free Report) and First Trust Indxx Innovative Transaction & Process ETF (LEGR - Free Report) may deal with some pressure on the Facebook news.
Investors should note that mining of cryptocurrencies involves the usage of semiconductors. So, if the cryptocurrency space takes a hammering, investors may see pressure on semiconductor ETFs like Semiconductor Vaneck Vectors ETF (SMH - Free Report) , Invesco Dynamic Semiconductors Portfolio (PSI - Free Report) and SPDR S&P Semiconductor (XSD - Free Report) (see all technology ETFs here).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>