Please ensure Javascript is enabled for purposes of website accessibility

Why Bitcoin Investment Trust Stock Dropped on Monday

By Jordan Wathen - Nov 19, 2018 at 1:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Regulators are cracking down on cryptocurrencies in the United States.

What's happening?

Shares of Bitcoin Investment Trust (GBTC 1.17%) are down by roughly 11% as of 1:00 p.m. EST, following the 9% plunge in bitcoin (BTC-USD) since the close of the stock markets on Friday. Cryptocurrencies large and small are diving in value as investors try to make sense of recent regulatory action.

So what

On Friday, the Securities and Exchange Commission (SEC) settled charges against two companies for their illegal initial coin offerings (ICOs). The SEC contends that CarrierEq Inc. (AirFox) and Paragon Coin Inc. should have registered their ICOs, which raised $15 million and $12 million, respectively, as securities.

Put simply, the SEC believes that companies that raise money by issuing "coins" or "tokens" should register with the SEC just as companies who raise money by selling stock to the public do.

Artist's rendering of what a physical bitcoin token might look like.

Image source: Getty Images.

In a press release, Stephanie Avakian, co-director of the SEC's Enforcement Division, said, "these cases tell those who are considering taking similar actions that we continue to be on the lookout for violations of the federal securities laws with respect to digital assets." It's being interpreted as a warning that a regulatory "open season" may soon begin on unregistered sales of tokens to investors.

Earlier this month, the SEC took aim at an online exchange for helping investors transact in digital currencies. The SEC charged Zachary Coburn, founder of trading platform EtherDelta, for operating an unregistered exchange. The settlement included $300,000 disgorgement of earnings, $13,000 of interest, and a $75,000 penalty.

Now what

The SEC's crackdown on ICOs and exchanges doesn't directly relate to bitcoin or Bitcoin Investment Trust, but it's a sign that regulators may take aim at companies that issue cryptocurrencies, as well as at those that make markets in them. Shares of Bitcoin Investment Trust are backed by roughly 0.001 bitcoin each, thus making it the only quasi-bitcoin ETF easily available to American traders.

The market seems to be taking the view that anything that makes cryptocurrencies harder to purchase is bad for bitcoin, the biggest cryptocurrency of them all.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Grayscale Bitcoin Trust (BTC) Stock Quote
Grayscale Bitcoin Trust (BTC)
GBTC
$13.85 (1.17%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.