US SEC and ESMA’s narratives for crypto-custodians to improvise on liquidity angsts for BTC ETF approvals

In a recent trend, the cryptocurrency derivatives have been in limelight one or the other way, be it for good or bad reasons. It could be for the launching procedures of newly designed crypto-instruments business including cryptocurrency futures, cryptocurrency CFDs, cryptocurrency options or ETFs), or for their performances. Hence, they have been under the meticulous scanner of the renowned global regulators, such as US SEC, CFTC and UK’s Financial Conduct Authority (FCA).

Now, the European Securities and Markets Authority (ESMA), the E.U.’s in-house financial agency based in Paris, have released an in-depth report on “crypto-assets.” Wherein, the substance shines some light on how the regulators should address digital currencies and guide exchanges dealing with them. In this perspective, it outlines live apprehensions of the crypto avenue and the potential threat areas, like the reliability of custodians and liquidity matters. 

Notably, the ESMA alarms this emerging asset class, with liquidity concerns in conjunction with other issues, like scams, fraud, missing surveillance measures, speculations, and cyber-attacks, etc are the genuine hindering reasons that resemble with the U.S. Securities and Exchange Commission (SEC) clarifications on the BTC ETF deferrals and denials. Even the mandatory statements of the SEC regulations have also come up with the same apprehensions for ETF approvals.

Analysts at ESMA reckon these types of risk areas because such threats are not unique in any asset classes, they are aggravated especially in the case of crypto-avenues predominantly due to their high price volatility and low liquidity. We usually assume the rate of return for illiquid assets to reasonably exceed the rate of return for liquid assets. Because, if at all asset is considered to be liquid, when one may transact it without materially impacting its prevailing market price. So, price volatility also matters the liquidity. Of-late, it is observed that the huge price volatility of cryptocurrencies is majorly due to the stringent regulatory actions on ETFs.

While crypto radicals should now be holding their nerves for the launch of Bakkt until January 24th and February 26thfor a final approval or denial of a Bitcoin ETF from the SEC.

In addition to that, the US Securities and Exchange Commission (SEC) has rescheduled its decision on whether to approve the Bitcoin exchange-traded fund proposed by VanEck and SolidX. The regulator deferred the deadline to make a decision on the proposed ETF to February 27, 2019. A decision was expected no earlier than December 29, 180 days from the time the ETF duo submitted their application for the fund.

Currency Strength Index: FxWirePro's hourly BTC spot index is inching towards -30 levels (which is bearish), hourly USD spot index was at 67 (bullish), while articulating (at 12:45 GMT). 

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