SEC: Bitcoin and Ether ETN exposed, BTC price reacts cautiously

The US Securities and Exchange Commission (SEC) is temporarily suspending trading of Bitcoin and Ether-ETN. This means that it will no longer be possible to trade the Bitcoin Tracker One (CXBTF) and Ether Tracker One (CETHF) securities until 20 September 2018.

However, the Bitcoin formula reacts unimpressed

First BTC-ETF, now also BTC-ETN and Ether-ETN: The SEC doesn’t trust the whole crypto thing yet. Sometimes it’s the high fluctuations in the Bitcoin formula, now it’s a lack of knowledge among investors. In any case, the US Securities and Exchange Commission announced the temporary suspension of Bitcoin Tracker One and Ether Tracker One trading in a public announcement:

“The Securities and Exchange Commission announces the temporary suspension of trading in the securities Bitcoin Tracker One (“CXBTF”) and Ether Tracker One (“CETHF”) pursuant to Section 12(k) of the Securities Exchange Act of 1934. The suspension will commence on 9 September 2018 and end on 20 September 2018 at 23:59 EDT.

The Commission has temporarily suspended trading in the CXBTF and CETHF securities due to confusion among market participants […]. The Commission warns broker-dealers, shareholders and potential buyers not to carefully examine the above information together with any other information currently available and any information that the company may subsequently issue”.

Investor ambiguities

According to this, it is probably primarily conceptual ambiguity that confuses potential investors. For example, the SEC advises that any applications should be carefully examined:

“In addition, brokers and traders should ensure that, according to Rule 15c2-11 of the Stock Exchange Act, no listing may be entered upon termination of the trading block as long as they have not strictly complied with all the provisions of the Rule. If a broker or trader has questions as to whether or not he has complied with the rule, he should not make an offer but should immediately contact the Trading and Markets Department of the Office for Interpretation and Advice at (202) 551-5777.

Furthermore, if a broker or trader is uncertain of what is required by Rule 15c2-11, he should refrain from entering quotations in respect of CXBTF or CETHF Securities until he has familiarised himself with the rule and is satisfied that all provisions have been complied with. If a broker or trader makes an offer that violates this rule, the Commission will consider the need for immediate enforcement.”

It is the proximity to the Bitcoin ETF, in particular, that is currently causing confusion among investors. By definition, Exchange Traded Notes (ETN) are an exchange-traded bearer bond that reflects performance 1:1. In contrast to ETFs, however, an ETN is not a special fund, i.e. not protected against insolvency. Click here for the details of the Bitcoin ETF.

Influence on the Bitcoin price
However, the Bitcoin price reacts cautiously to the SEC decision. Bitcoin is still quoted at almost 6,300 US dollars and a 7-day minus of around 13 percent. Last week’s price slump was probably related to a false report about the crypto trading desk plans of investment giant Goldman Sachs. In addition, the liquidation of a large number of crypto currencies, the origin of which is attributed to the haze circles of the Silk Road, is suspected to have fired the negative price event. The price reacted similarly cautiously to the SEC’s last announcement that it would temporarily not approve the Bitcoin ETFs.