The price of Bitcoin plunged by 18% on Friday after the U.S Security and Exchange Commission rejected a request to track Bitcoin through the exchange-traded fund. An exchange-traded fund is a marketable security that tracks an index, commodities, commodities, bonds, or a basket of assets like an index fund. An Exchange Traded Fund trades similarly as a stock on a stock exchange and would have allowed investors to arbitrate and leverage on Bitcoins as a tradable investment.
The commission's verdict
The denial by the regulatory body could be as a result of the use of the currency anonymously by individuals as well as the lack of a central governing body such as a central bank to regulate the creation and use of the digital currency. There is extensive use of Bitcoin in the purchase of illegal #Goods And Services both online and offline. The use of bitcoin by criminals has also attracted the attention of financial regulators, legislative bodies, law enforcement, and the media. Criminals use the currency to purchase goods and services on the dark web. The body also cited strict requirements on diversification as a reason for denial. The price of a Bitcoin hit a historical high of US$1291.33 on March the 3rd this year. The price of Bitcoin currently stands at US$ 1,228.
The rejection by the U.S regulator presents a new risk to current and future Bitcoin investors and limits Bitcoins adoption due to its poor treatment by governments as a validly regulated asset. In its ruling, the commission stated that Bitcoin is unregulated and is still in its early stages of development. The regulator also wondered how the fund would operate and whether the pricing and trading of bitcoin would be sufficient. Blockchain Capitals head of research said that "Bitcoin's price could fall but that its long-term adoption will continue."
A brief history of Bitcoin
Bitcoin was created by Satoshi Nakamoto as a virtual currency on 31st October 2008. Bitcoins have been set up as a reward in a competition where users offer their computing skills to verify as well as record bitcoin transactions into the blockchain; an activity referred to as mining. Miners that are successful receive transaction fees, and new bitcoins. Besides being obtained through mining, bitcoins can be exchanged for other currencies, products, and services. 100,000 merchants and vendors accepted bitcoin as payment in by the year 2015.