>"For example, trading in bitcoin is electronic, which facilitates competition and price transparency."

One of the main reasons this ETF was rejected is because many of the major exchanges like Bitfinex, BitMEX, Binance, and Kraken are alleged to be manipulators of spot price though wash trading, and front running their customers.

>"[23] Bitcoin are interchangeable, so that a purchaser is sure to get exactly the same thing no matter where she purchases it."

This is no longer true. Bitcoin transactions that have history tied to stolen funds, and illegal black market transactions will get your exchange account frozen and bank account flagged. ( see BTCe caught laundering MTGox funds https://www.theguardian.com/technology/2017/jul/27/russian-c... )

>[24] In addition, bitcoin mining is not geographically limited (except to the extent it migrates to places with cheap electricity), so it is not subject to geopolitical threats that plague other commodity markets.

This is a naive and incorrect risk assessment. Any large ISP is in a position to interfere, suppress, and drop traffic. Chinese based Bitmain, the largest BTC ASIC mining manufacture and the top known mining pools based in China are currently controlling over 40% of network block activity.

> One of the main reasons this ETF was rejected is because many of the major exchanges like Bitfinex, BitMEX, Binance, and Kraken are alleged to be manipulators

The fact that the price is being manipulated is indeed an issue, but the solution is not to reject the ETF but rather to implement an exchange that has proper audit mechanisms in place (as in: prevent wash trading that will make the SEC happy).

This concern was already the main factor that led to the previous rejection. Gemini seems to have worked hard to implement such audit mechanisms, but apparently still failed to meet the SEC's bar. That point was actually made in the dissenting opinion article.

The real question of course is if such an exchange, doing the right thing in a room full of offshore-based bad actors exchanges will actually manage to survive.

>>Bitcoin are interchangeable > That is no longer true

Actually, that was never true.

Bitcoin's lack of fungibility has been a problem from day one, and to address it, half-baked measures have been tried (mixers), new protocols have been discussed and implemented (coinjoin, coinshuffle, bulletproofs, ... https://medium.com/@nopara73/tumblebit-vs-coinjoin-15e5a7d58... has a summary). The full solution is ZKP-based protocols as implemented by some alts {ZCash, Monero, ...}

However, I'm actually not sure that this is a problem when it comes to gaining SEC approval. The traceability of Bitcoin , which many see as a weakness of Bitcoin might end up being a very pleasing aspect for the regulator.

>This is a naive and incorrect risk assessment.

It's unclear what amount of correlation - if any at all - exists between miner control and BTC market price. One thing that's always been true is that if a miner goes above 51% and starts to misbehave (as in, e.g. selectively mining transactions he likes, or more ham-fistedly, doing a 51% attack) this will deeply tank the price, and he'd be shooting himself in the foot.

In short, there is a built-in economic incentive feedback mechanism to "encourage" miners to behave, and that's a much stronger argument than the "geographically unlimited" one.

> the solution is not to reject the ETF but rather to implement an exchange that has proper audit mechanisms in place

The solution is for the SEC to run an exchange? How does that make sense? They should keep rejecting the ETF until such an exchange exists.

>It's unclear what amount of correlation - if any at all - exists between miner control..

Manipulation of arbitrage and suppression/prioritization of transactions.

This was demonstrated in an attack on the Ethereum network by the mining pool F2Pool, where a timed smart contract was manipulated by the mining pool to prioritize its own transaction and ignore other users transactions.

The issue seems to be "prevent fraudulent and manipulative acts and practices" in the spot markets.

Is stop hunting considered a manipulative practice? Because it's happening every day in bitcoin markets. But stop hunting also happens in the currency markets (which also have ETFs), albeit they are more sophisticated and tend to happen around news. I'm not talking about bucket shops, I'm talking about the real interbank market.

How does stop hunting work in currency markets? If you want to go stop hunting, it seems you need to be able to push the price down somehow, no?

On an unregulated BTC exchange, that's fairly easy to do (e.g. wash trading).

Short of collusion between many high-level actors, how do you do that in the interbank market?

Are you suggesting that manipulation is okay, if it has historically happened in a regulated market?