Daily market review for 03.07.2018

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2018-07-03 15:05:20

This week, the US Securities and Exchange Commission (SEC) approved plans for open public discussions that made it easier for investment companies to bring new exchange-traded funds (ETFs) to the market. Does this innovation contribute to the creation of a larger number of ETFs in the blockchain industry?

The proposed changes allowed the ETFs to avoid the need for special permission from the SEC and help create “model” ETFs. SEC commissars unanimously accepted this proposal.

A new rule for most ETFs

Jay Clayton, the chairman of the SEC, said that the new rule would help “level the playing field” and that “it will cover most ETFs working today and all such ETFs that will be launched in the future.”

Clayton explains that the new rule does not apply to all products, and some of them require more careful study. For example, complex products with a leverage mechanism, sometimes called “exotic” ETFs, can not be created within the new process.

Theoretically, this change can open the market for investment companies offering blockchain ETFs. ETFs, which instead of investing in cryptocurrency, invest in companies that develop or are based on the blockchain technology. Traditional investors can consider blockchain ETFs as the least risky way to benefit from the new blockchain economy.

In practice, there was no explanation whether blockchain ETFs would be subject to “more thorough control”. It is possible that they will not be the subject to scrutiny if they fall within the definition of “model” ETFs, based, for example, on stock or bond options without “exotic” functions.

Effect on bitcoin ETFs

Although the SEC did not mention the impact of the new rule on the blockchain or bitcoin ETFs, it is likely that bitcoin ETFs investing directly into cryptocurrencies are unlikely to benefit from the new process.

The SEC is currently considering applications for several bitcoin ETFs and has not yet approved any of them due to unresolved issues regarding cryptocurrency markets and a way to assess and regulate coins. The SEC has already rejected more than a dozen applications, and earlier this year the Commission forced three companies to withdraw applications for bitcoin ETFs.

The head of the investment activity department of the SEC, Dalia Blass, wrote a letter in March 2018, which sets out the SEC's concerns about bitcoin ETFs. Establishing of the bitcoin ETF would be a significant development, and some experts suggested that this could happen sooner rather than later.

If the new rules proposed by the SEC are implemented, it will quickly become clear if the bitcoin ETFs are evaluated in the same way as ETF investing in more traditional companies and technologies. If the SEC is actually trying to make life easier for a “model” ETF, then the likelihood of such a development is quite high.

However, the SEC can also decide that blockchain ETFs require “more thorough examination”.

Still, the weakening of the regulatory pressure on the ETF market, which is worth $3.6 trillion, still marks progress that can eventually lead to the fact that blockchain and bitcoin ETFs become common occurence for institutional markets.

In 2018, the SEC approved seven blockchain ETFs - the first of which were products launched on January 18 by Reality Shares Advisors and Amplify Trust on the Nasdaq and the New York Stock Exchange (NYSE). The regulator of Canada, in turn, approved the launch of the first blockchain ETF in February this year. In addition, in June, Reality Shares launched the first blockchain ETF in China.

Now, let's move to the technical analysis of bitcoin (BTC):

Our yesterday's forecast was accurate. Bitcoin rose sharply to a resistance level of $6,640. During this week, it is constantly growing with the gap upwards. This is now the most beloved pattern of bitcoin. More than likely, it will fall to a support level of $6,370 and then continue its growth. The nearest resistance level is $6,750. The nearest support level is $6,370.

Technical analysis of Ethereum (ETH):

Our yesterday's forecast was also quite accurate. Ethereum grew after consolidation to a resistance level of $480. Then, it went to the correction, going down to a mirror support level of $460. This level can become for ethereum the basis for further growth. The nearest resistance level is $500. The nearest support level is $460.

Technical analysis of Ripple (XRP):

Ripple did not realize our yesterday's forecast in full. It rose to $0.50, but did not reach the goal of $0.55. Now it is consolidating at the level of $0.48 and we expect that it will reach the next support level of $0.55. The nearest support level is $0.47.

Disclaimer. This review is only for information purposes and cannot be considered as a proposal or an indication to perform certain transactions in the financial and commodity markets. The estimates and recommendations in the review are the personal opinion of the company's analysts. The company's view on the prospects for individual financial instruments is valid as of the date of the report. The Company does not assume any liability and liabilities for compensation for damage that may result from the use of this report.
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