The SEC Just Handed Bitcoin a Huge Setback (theverge.com)

The SEC has decided to deny an application for the first exchange-traded product that tracks the price of bitcoin, according to an order posted on the regulator's website. From a report: In an order today, the commission found that the proposed fund was too susceptible to fraud, due to the unregulated nature of Bitcoin. The result is a major setback for the fund, and a frustrating false start for the crypto-currency at large. The ETF is essentially a common stock fund pegged to the price of Bitcoin, allowing investors to purchase Bitcoin without the work of establishing a personal wallet. (In concrete terms, the ETFs investors will be buying shares whose price will always be the same as the price of a single bitcoin, similar to an equivalent investment in gold or cattle.) Without a wallet, investors still won't be able to spend Bitcoin, but they can buy and sell it at market price, adding more liquidity to the Bitcoin system overall.

Comments

Bitcoin not setback at all.

[HornWumpus]

Now investors need to actually buy bitcoin, not just some shadow fund that may of may not actually hold bitcoin. Likely the fund would play arbitrage and create virtual bitcoins by matching short and long positions into nothing but profit for them.

Having a fund might somehow 'add liquidity', but only a small share for the liquidity that investors buying/selling actual bitcoin will add.