August 11, 2018
I strongly oppose allowing the listing of the Bitcoin ETF.
Bitcoin is a pure speculation vehicle with no traditional value or commercial/industrial use. It has no fundamentals, is exceptionally volatile and is easily manipulated due to poor market liquidity and no market regulation. A CBOE listed ETF that is proposing to be a passive Bitcoin holding vehicle is nothing more than trying to get a broader pool of investors involved in something that would never be allowed for listing on a regulated stock exchange if it was a company.
This proposal most likely exists at all to draw additional money into the Bitcoin "ecosystem" as it is commonly called, essentially transferring risk from current market participants to newcomers who otherwise would not know how to get involved or would be prohibited by regulation or governance ethics from doing so.
Additionally, much of the purported size of Bitcoin is an illusion, with "market cap" as reported on private websites such as Coinmarketcap.com taking all coins ever in existence multiplied by an average of the last traded price in dollars. Volume is commonly reported as all Bitcoins traded in dollar value even if, as is the case, most of them did not trade against hard currency at all, instead trading against other cryptocurrencies or Tether, a purported 1:1: USD backed cryptocurrency that has been used to artificially pump the price and is more comparable to counterfeit money.
https://www.bloomberg.com/news/articles/2018-06-13/professor-who-rang-vix-alarm-says-tether-used-to-boost-bitcoin
Stripped of crypto/crypto, Tether/Bitcoin volume and no-fee (i.e. wash trading allowed) exchange volume, Bitcoin is far too small to justify a CBOE listed investment vehicle.
Few of the exchanges from which Bitcoin prices are currently derived make any effort at regulatory compliance. Most utilize Tether instead of US dollars to avoid complying with KYC/AML rules. They often allow exceptionally reckless, gambling type behavior such as 20-100x leverage that serves no legitimate purpose and amount to "spot options" or "binary options" as any negative move will liquidate the trader. One of the largest exchanges, OKEx, recently suffered a systemic loss when it allowed the development of a $416 million position in Bitcoin futures by leverage, liquidated it for losses, then used an irregular clawback policy on winning traders to remain solvent.
https://www.cnbc.com/2018/08/03/enormous-losing-bet-by-a-bitcoin-whale-leaves-its-counterparties-to-.html
These are the entities that are currently reporting Bitcoin prices" for the basket pricing method used to assert what Bitcoin is worth.
The ETF in this case solves none of these problems as its proposed structure has it only passively holding Bitcoins and thus exposing any investor to wild swings in the value of the underlying asset, swings determined by non-hard currency trading, otherwise illegal trading practices, and trading involving extreme leverage and unusual rules.
The SEC would not permit the listing of a penny stock ETF. It should not permit the listing of something so similar.