Days after the first bitcoin exchange-traded fund (ETF) was roundly rejected by regulators, this much is certain: digital currency investors remain in waiting for the asset's proper Wall Street debut.
But, how long exactly might this be? And will bitcoin ever see mainstream market acceptance? Those are just some of the lingering questions that the tech's avid supporters, and industry analysts, are now left with.
However, a consensus on sentiment is starting to emerge.
In the aftermath of the SEC's decision, many in the industry are asserting that the rejection was more than just an indictment of the particular proposal. Rather, they argue it was a clear message that further maturation of bitcoin markets is needed before such a product can be offered to retail investors.
Blake Estes, an attorney with Alston & Bird, argued that those seeking to launch similar financial projects aimed at retail investors will likely be destined for the same fate as the Winklevoss proposal.
"It is clear that the SEC believes that the bitcoin markets do not currently have the structural protections and controls necessary to support an ETF product."
Estes focused on the SEC's emphasis on "fundamental deficiencies" in the bitcoin markets, arguing any proposed investment vehicle will likely see a drawn-out approval process and rejection.
"I don’t see what would change in the underlying bitcoin markets so significantly in the next six to 12 months that would allow the SEC to get comfortable," he said.
As the SEC's mandate is to ensure that investors are protected, observers emphasize that more work must now be put into building investor and consumer protections in the bitcoin ecosystem.
Mark T Williams, a professor at Boston University’s business school and former bank examiner at the Federal Reserve, used the rejection to highlight his long-held criticisms of the market surrounding cryptocurrencies generally.
"This detailed SEC ruling makes it clear that more focus has to be placed on needed protections to stabilize and add basic controls over the bitcoin infrastructure before it will be investor-safe and ready for public consumption," he said.
He went on to add that a premature approval of an investment vehicle without such protections would likely undermine the long-term prospects of such currencies and innovations in blockchain technology.
"I was a little surprised that so many market pundits assumed that the SEC would simply approve this bitcoin ETF and ignore concerns about price discovery, lack of regulation, operational standards and controls that increase price manipulation, fraud and cyber risk.”
Estes agreed, arguing that the reasons for disapproval were due to deficiencies in underlying markets – and the fear of worst-case scenarios.
"The SEC’s nightmare scenario is they approve this, all this retirement money floods in and then there’s another enormous headline-grabbing hack where millions of bitcoins are stolen or something happens in one of the Chinese markets," he said.
Still, given the swift rebound in bitcoin’s price following Friday’s announcement, another question being weighed is how much Wall Street approval ultimately matters to bitcoin’s legitimacy.
"I think bitcoin [will never get] accepted by financial regulators in any major way, and the reason why is that it's fundamentally against sovereignty," said Josh Crumb, co-founder of GoldMoney and a former commodities strategist at Goldman Sachs.
"Bitcoin’s utility is that it cuts through sovereignty. It’s its own law."
Mati Greenspan, senior market analyst at eToro, voiced a similar sentiment, stating his belief that cryptocurrencies don't need SEC approval to gain legitimacy.
"Although bitcoin was volatile around the time of the announcement, the bounce back in price shows increasing confidence in the asset," he said.
Nonetheless, observers reckon that successful operation of these vehicles could potentially be a bridge toward bitcoin being packaged more broadly for the public.
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