- Unhealthy reasons have caused the cryptocurrency market volatility.
- The wild crypto market gyrations might prevent the SEC from approving Bitcoin-based ETFs
While the cryptocurrency enthusiasts celebrate the end of crypto winter and Bitcoin's 200% growth since the beginning of the year, some experts express concerns about the nature of the recent volatility.
"Volatility itself is not a dirty word, as long as the returns are commensurate with the risks," - Jeff Dorman, chief investment officer at Arca, wrote in the recent report. "This rapid ascent in price started for real reasons but ended with massive levered gambling buying. We witnessed record futures, options and other derivative volumes all skewing bullish and short-dated, coupled with unstable long/short ratios, and unregulated exchanges offering 100:1 leverage to investors who thought higher prices were a foregone conclusion."
Such inherently unstable rallies and excessive volatility reduces the chances that Bitcoin ETFs are approved by the U.S. regulator, the expert says.
It is worth noting that the Securities and Exchange Commission has already declined several Bitcoin ETF proposals due to the concerns related to high market volatility and the risks of price manipulations.
Bitcoin (BTC) gained over 80% in 16 days, from June 10 to June 26 and lost 24% in a single day - from June 26 to June 27.
Those violent moves were fueled by unregulated exchanges that allow users trading with huge leverage up to 1X100, which means that the volatility was caused by unhealthy reasons of "excessive leverage and outsized risk-taking."
"It's almost a slam dunk now that an ETF won't be approved any time soon, as an 81% 14-day levered rally, most of which occurred after U.S. trading hours, is not exactly the formula for successful SEC approval," the expert added.
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