Thread by @jchervinsky

1/9 For bitcoin ETF watchers, the final question of 2019 is whether Bitwise will follow VanEck's example and withdraw their proposal, or press on and force the SEC to issue a written order. Does Bitwise stand a chance of approval even though VanEck presumably expected rejection?

2/9 No, probably not. The SEC has said repeatedly that the main barrier to ETF approval is a lack of surveillance-sharing agreements with regulated markets of significant size. There's little reason to think Bitwise has a better chance of overcoming this hurdle than VanEck did.

3/9 I explained this problem in a recent podcast with @ledgerstatus, which was ominously (but accurately) titled "don't expect bitcoin ETF approval soon, with Jake Chervinsky." Listen to the first ~30 minutes if you want all the details.
ledgerstatus.com/dont-expect-bi…

4/9 To summarize the main problem: the SEC's view is that there *aren't any* regulated bitcoin markets of significant size. Needless to say, it's tough for ETF sponsors like VanEck and Bitwise to enter surveillance-sharing agreements with markets that don't exist.

5/9 In this round of ETF proposals, VanEck and Bitwise tried to satisfy the SEC's concerns around manipulation by using improved pricing mechanisms instead of surveillance-sharing agreements. In theory, that's an acceptable way to satisfy the requirements of the Exchange Act.

6/9 My guess, unfortunately, is that VanEck withdrew its application after becoming convinced that the SEC wouldn't accept its alternative approach to this problem. If that's true, it's *very* hard (though not entirely impossible) to imagine Bitwise's approach faring any better.

7/9 It shouldn't surprise anyone that the SEC isn't ready to approve a bitcoin ETF yet. All you have to do is listen to SEC Chairman Jay Clayton, who consistently emphasizes his lack of confidence in today's bitcoin markets. Here's a recent example:

8/9 I suspect VanEck preferred to withdraw their proposal instead of letting the SEC write a formal order explaining why it was deficient. Those orders become precedent that the SEC considers in the future, and bad precedent could make the task of getting approval even harder.

9/9 If Bitwise expects rejection, won't they withdraw their proposal too? Maybe, maybe not: sometimes it helps to have the SEC's concerns on record, so as to clearly address them down the road. Precedent has its benefits too.

Either way, I'd put the chance of approval at 0.01%.