Is the US SEC attempting to manipulate the supply of bitcoin?

Leo Melamed, Chairman Emeritus of the company and the time the first Bitcoin futures contract was introduced by CME Group in 2017, is renowned for saying he would “tame” Bitcoin. Since then, the SEC has authorized a number of ETFs. However, concerns about market manipulation have begun to surface when exchanges expanded the amount of BTC by offering “paper Bitcoin” for sale.

“We will regulate, make Bitcoin not wild, nor wilder,” Melamed said to Reuters at the time. We’ll tame it and make it a regular, regulated trading instrument.

By purchasing an asset that tracks the price of Bitcoin, investors can participate in the exchange-traded fund (ETF). but without actually directly owning the underlying asset. Such funds are regulated by the Securities and Exchange Commission in the US (SEC).

The ETF is a paper that can be traded during the trade process and is structured similarly to an IOU, a non-official instrument acknowledging debt. Observers wonder if the purpose of paper Bitcoin is to use the SEC as a regulator to influence the underlying value.

James Crypto Guru, the creator and CEO of the cryptocurrency network MagicCraft, said to BeInCrypto, “It’s banks attempting to take control but it’s also just the typical system they utilize.”

“In a sense, it does manipulate and control. However, the general public is aware that they need Bitcoin from the blockchain, and as a result, their [banks’ BTC holdings] will eventually be considerably lower than the market as a whole, according to the trader and YouTube influencer.

According to James Crypto Guru, difficulties with market manipulation will cause a short-term decrease in the price of Bitcoin. But in the long run, he continued, “[this will be] extremely excellent for adoption.”

In October 2021, the SEC approved the first Bitcoin ETF that makes investments in futures contracts. On October 19, the Proshares Bitcoin Strategy exchange-traded fund became the first Bitcoin ETF to ever be listed on the New York Stock Exchange.

Shares were traded for close to $1 billion on the first day of trading. When the ETF was approved, the price of Bitcoin shot up to a then-record $64,124. However, Bitcoin has now dropped by 75% and is currently trading at $16,500.

The Bitcoin futures ETF, according to cryptocurrency analyst Willy Woo, would be harmful for retail investors since it would give institutional investors like hedge funds an advantage.

Woo subsequently tweeted, “In my opinion, it will be an expensive method to hold BTC.” “Through a chain of profit incentives, the exchange-traded fund effectively outsources the holding of Bitcoin to hedge funds,” he asserted.

The “potential for price suppression and increased volatility owing to futures dominance” is what Woo claimed an ETF for Bitcoin futures possesses. Because of the sizable, long positions taken by hedge funds, he anticipates that BTC futures will become more expensive compared to spot price.