A speculative article from Crypto Daily has opened up a new area of consideration that many investors may not have thought of. The article suggests that, if it wanted to, the U.S. Securities and Exchange Commission (SEC) could, in fact, manipulate the price of bitcoin through its actions. Of course, this is not to suggest that the SEC has done so or will do so in the future. It simply illustrates some of the concerns that analysts and investors have about changes to bitcoin's level of decentralization as time has gone on. Below, we'll explore these changes and take a look at the impact of the SEC on the price of bitcoin.
The debate over bitcoin exchange-traded funds (ETFs) has gone on for a while. Numerous funds have attempted to launch, but none has so far received approval from the SEC. For the SEC's part, one reason for this is that the bitcoin market is vastly unregulated and could be the target of price manipulation, fraud and other concerns which may impact the activities of investors.
The most recent (and, for many in the community, most promising) major bitcoin ETF application was for a fund launched by VanEck and SolidX. Following a period of consideration and a commentary window, the SEC had determined that Aug. 10 would be the earliest possible date that it would reveal a decision regarding this ETF. However, when the day came, the SEC announced plans to extend their deadline. Indeed, it may not be until the end of September that the cryptocurrency community knows the fate of the VanEck and SolidX fund.
The Result of the SEC Action
When the SEC announced that it would delay the decision, the cryptocurrency markets responded. It's common for these markets to react quickly and decisively to news items of all kinds, and this case was no different. Bitcoin dropped about 8% in just a few hours, while other cryptocurrencies dipped by even more. As is typically the case, the impact of the news is greatest immediately following the story. As time goes on, the markets tend to even out. Nonetheless, this most recent example shows just how much power the SEC has over the cryptocurrency markets, whether direct or indirect.
Looking ahead to the new Sept. 30 deadline, it's easy to imagine that cryptocurrency markets will display an even greater reaction when the SEC decision is revealed. If the bitcoin ETF is fully approved, one can see the price of tokens across the board skyrocketing; if the ETF is denied, the dip could be even greater than the one last week.
What the SEC Can Do
In the period leading up to Sept. 30, it's likely that the price of bitcoin will become increasingly volatile. The SEC could, theoretically, allow rumors suggesting the ETF will be rejected or that the decision will be further delayed, which would likely have the effect of further dropping the price of bitcoin. But an investor who knew that the ETF was, in fact, going to be approved could buy in at a relative low point in advance of the announcement.
Certainly, price manipulation would never be officially sanctioned by the SEC. However, it's possible that individuals with knowledge of the decision at the SEC could take advantage of this, even though such insider trading is illegal in the securities world. It's highly unlikely that these individuals would abuse their power. However, the fact that this is even a possibility says a great deal about how decentralized the cryptocurrency space really is.