Bitcoin ETF Delay; Cryptopia Enters Liquidation; BitGo Unveils New Institutional Service

Leading the crypto headlines over the past 24 hours was the all-too-familiar announcement by the SEC to delay a decision on whether or not to approve a bitcoin ETF. We also learnt that New Zealand-based crypto exchange, Cryptopia, pulled the pin on its short-lived attempt to revive its business following a recent hack, announcing it has gone into liquidation.

It wasn’t all bad news in the crypto space, however. One particularly promising piece of news came from leading custody provider, BitGo, who announced the launch of a new clearing and settlement service it believes solves a number of problems that have long deterred would-be institutional investors from gaining exposure to the cryptoasset class.

In the markets, bitcoin (BTC) dipped 1.17% for the day to trade at $7,883.1, at the time of writing. Indicative of traders taking BTC-denominated profits, ether (ETH) spiked 9.9% to $226.7, its highest point in over seven months. Additionally, the MVIS CryptoCompare Digital Assets 10 Index is currently tracking at 3,698.1, a 4.9% rise over the past 24 hours.

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SEC Again Delays Decision on Bitcoin ETF

In a document published by the U.S. Securities and Exchange Commission (SEC), the financial regulator revealed it would hold off on making a decision on the Bitwise exchange-traded fund (ETF) proposal filed with NYSE Arca.

Once the Bitwise ETF is published in the Federal Register, a three-week-long public comment period will commence. This will be followed by a two-week-long period for responses. The SEC has until August 14 to make a decision on the Bitwise ETF. Should they - for the last possible time - choose to delay once more, the final deadline will become October 13.

Crypto Exchange Cryptopia Halts Trading, Enters Liquidation

The recently-hacked crypto exchange, Cryptopia, yesterday announced it has halted trading immediately and entered liquidation. In a statement by the appointed liquidators – Grant Thornton New Zealand – they explained they “are focused on securing the assets for the benefit of all stakeholders.”

Customers and suppliers of Christchurch-based Cryptopia will be contacted by Grant Thornton “about its appointment in the next few days,” according to the press release.

BitGo Launches New Settlement Service for Institutional Clients

The world’s leading crypto custody provider, BitGo, announced it is launching a new clearing and settlement service for its institutional, regulated BitGo Trust Company clients. The product – which is an off-chain settlement solution – will ensure cryptoassets never leave custody whilst being transferred. This is possible because BitGo will, on either side of their clients’ trade, act as the custodian.

In addition to reduced counterparty risk, BitGo’s new solution promises to be a more efficient and compliant way for institutional investors to clear and settle cryptoasset transactions.

“Until now,” BitGo’s chief executive Mike Belshe explained in a press release, “in a digital asset trade, one party needed to assume all of the risk and act on the counterparty’s good faith, and this doesn’t really work for institutional investors.”

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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