U.S. SEC Officials Met With Bitcoin ETF Teams to Discuss ETF Feasibility

Representatives from VanEck, SolidX, and the CBOE’s BZX Exchange had a meeting with the U.S. Securities and Exchange Commission (SEC). According to reports, the objective of the meeting was to show SEC officials that the bitcoin market has reached a level of maturity comparable to similar commodities, such as crude oil, silver, and gold, which all have tradable ETF’s.

The SEC had members of their Division of Corporation Finance, Division of Trading and Markets, Division of Economic and Risk Analysis and Office of General Counsel present in the meeting, to hear the case for the Bitcoin ETF. The ETF issuers made the argument that: “similar to commodity futures, the spot and futures prices [of bitcoin] are tightly linked,” which confirms that we have “evidence of a well-functioning capital market.”

Another strong reason presented for bitcoin ETF approval was that it’s unlikely for there to be insider trading around any changes to the BTC supply. Unlike crude oil or precious metals, which can be suddenly discovered or impacted by global events, the supply of bitcoin is fixed and will never change. In addition, the fact that Bitcoin is traded across so many mediums (futures, options, and spot) without a price differential could show that manipulation is not happening:

The linkage between the bitcoin markets and the presence of arbitrageurs in those markets means that the manipulation of the price of bitcoin on any single venue would require manipulation of the global bitcoin price in order to be effective … Bitcoin therefore is no more susceptible to manipulation than other commodities, especially as compared to other approved ETP reference assets.

A few days ago, SEC Chairman Jay Clayton spoke at the Consensus: Invest Conference in New York City. During this interview, he spoke about the legality of initial coin offerings (ICOs), but also touched on what it would take for a bitcoin ETF to be approved. He believes there won’t be any cryptocurrency ETF until market manipulation and custody are completely fixed:

What investors expect is that the trading in that commodity that is underlying the ETF is trading that makes sense, is free from the risk or significant risk of manipulation. Another thing they really care about, [that] we really care about, is that the assets underlying that ETF... that you have good custody of it, that it's not going to disappear, that the risk in the ETF is truly the risk in the value of the underlying asset, it's not the risk of theft or disappearance. Those two issues are important to me to get comfort on before we would allow an ETF with a digital currency underlying it to go forward.

Could these developments mean that an ETF is coming soon? It’s too soon to tell, but every day it seems more likely that a bitcoin ETF will happen sometime in the future.

Crypto Market-Maker Altonomy Receives $7 Million in Funding from Polychain Capital

Altonomy, a New York-based cryptoasset trading, advisory, and asset management company, has completed a $7 million fundraising round from Polychain Capital, a leading hedge fund and venture capital firm.

Co-founded by Ricky Li, a former Manager of Research and Product at the CME Group, Altonomy has also received funding from 7 Blocks.

Additional Capital Will Allow Altonomy to Have More Inventory

Commenting on how the additional capital could help Altonomy’s business operations, Li said: 

As a liquidity provider for altcoins, more funding will allow us to have more inventory, taking larger exposure and managing risk more effectively.

Li added that the extra funding would allow Altonomy’s trading desk to provide better services - as the platform would not need to “put constraints” on customers at settlement.

Funds May Be Used to “Source Liquidity for Customers”

Olaf Carlson-Wee, the Founder and CEO at Polychain Capital, remarked:

As a long-time user of Altonomy’s trading services, it was an easy decision for us to invest in their business when the opportunity became available.

Carlson-Wee, a former Product Manager and Head of Risk at Coinbase, also mentioned that the additional funding would help “source liquidity for customers, regardless of token type, order size, market cap, or whether the asset trades on centralized or decentralized exchanges.”

According to Coindesk, Li had suggested to investors in January 2019 that they “liquidate enough ETH so they would have at least two years of runway.” However, Li is now anticipating that cryptocurrency prices may continue to recover - after enduring a long bear market that lasted throughout 2018.

Altonomy Introduces Cloud Service for Crypto Mining

In addition to providing crypto trading and asset management services, Altonomy introduced a new product last year, called the AltMiner. According to Li, AltMiner’s cloud service allows Altonomy’s bigger investors to mine various cryptocurrencies.

Altonomy’s management claims that the AltMiner has a “superior return profile” with the “newest generation of miners, low electricity costs and a secure hosting site.”

During an interview with CryptoGlobe in May 2019, Lee explained how Altonomy’s crypto trading services were developed and their potential benefits.

One of Altonomy’s main services, called electronic execution, allows mining firms, investment companies and crypto exchanges to “enter and exit positions as an outsourced execution desk.”

As a high-frequency market-maker, Altonomy also provides liquidity for various tokens to several crypto spot and derivatives trading platforms.