The price of the world’s largest cryptocurrency by market capitalization slumped on Friday morning from above $31,000 to briefly below $30,000, dropping approximately 3% in a matter of minutes.
The sudden dip in Bitcoin follows a report from the Wall Street Journal that the U.S. Securities and Exchange Commission told securities exchanges Nasdaq and Cboe their applications for a Bitcoin spot exchange-traded fund, which they submitted on behalf of asset managers like BlackRock, were “inadequate.”
Nasdaq and Cboe weren’t specific enough in their filings, the U.S. regulatory agency said, pointing out that their ETF applications did not outline the nature of surveillance-sharing agreements—key provisions to allay the SEC’s concern over market manipulation—that BlackRock, Fidelity, and other asset managers had touted. It also said the exchanges did not name the Bitcoin spot exchanges the asset managers planned to partner with in these agreements.
The SEC’s reported comments may just be a temporary setback, however, as Bloomberg ETF analyst Eric Balchunas pointed to a section of the Journal’s report in which the agency said the exchanges can update their applications and refile. Balchunas added the report is “arguably good news.”
The drop in Bitcoin’s price follows a weeks-long rally that saw the cryptocurrency reach its highest price in more than a year amid a flurry of ETF applications from big institutions.
In mid-June, BlackRock, the U.S.’s largest asset manager, filed an application for a Bitcoin spot ETF. As of yet, no asset manager has successfully received the SEC’s approval for such an ETF, which would expose Bitcoin to trillions in dollars from brokerage accounts and pension funds. (The SEC has approved, however, a Bitcoin futures ETF.)
The crypto market rallied on news of BlackRock’s filing, optimistic that a firm of its stature would be the first to successfully pass the federal agency’s muster and prove that, through a surveillance-sharing agreement with Nasdaq, it can weed out market manipulation, a reason the SEC has repeatedly cited in its denials of Bitcoin spot ETF applications.
Other large asset managers, including WisdomTree, Invesco, Bitwise, ARK Invest, and Fidelity, followed BlackRock’s lead, and either resubmitted or updated existing ETF applications with their own surveillance-sharing agreements.
Bitcoin responded accordingly and has consistently traded above $30,000 in the latter half of June, an almost 100% increase in price since January.