In this article, I will discuss the latest developments in European monetary policy and review an interesting chart which shows historical real labor unit costs, but first I will react to the breaking news about bitcoin which was released Friday afternoon.

Bitcoin ETF Denied

The, much heralded by the media, Winklevoss Bitcoin ETF was denied by the SEC. This caused the price of bitcoin to fall from $1,282.38 to $1,035.08 as you can see in the chart below. It has rebounded about $100 since then as the initial knee-jerk reaction has run its course. Prior to this decision, the betting odds had about a 50% chance of the ETF being accepted by the SEC. I had no idea whether it would be accepted or rejected by the SEC as I’m not knowledgeable on the specific regulations of ETFs.

The first point I will make is that the rejection of this ETF doesn’t mean anything for the long-term fundamentals of the currency. The ETF would have provided additional demand for bitcoin which is why the price ran up so high prior to the decision. I said that it was a bad idea to buy bitcoin when it was above $1,200. Now that it has corrected, you can resume regular purchases. The concept of a bitcoin ETF is a non-starter in my opinion because it removes what makes bitcoin great. It removes trustless transactions. The reason there is a gold ETF is because gold is a physical item which can’t be traded easily. Bitcoin was built online and is easy to trade. There is no need for an ETF. If a hedge fund manager has restrictions on what he/she can buy, he/she must get the restrictions changed. It’s easy for anyone else to buy bitcoin using Coinbase as a digital wallet and Trezor has a storage wallet.

Looking at the SEC’s decision, the government regulatory body cited risk of fraud and a lack of regulation in the world’s bitcoin markets. The Winklevoss twins underwent a three-year process to get this ETF approved. It seems like a lot of wasted effort to me. The SEC left the possibility for an ETF to be approved in the future if the currency develops further in terms of regulations and having “surveillance-sharing agreements with significant markets for trading the underlying commodity or derivatives on that commodity.” As a bitcoin proponent, I’d be willing to forego having an ETF to allow it to remain mostly unregulated.