Crypto markets are too small and Bitcoin would need to see prices around $150,000 to warrant an ETF. That’s the view of Fundstrat Global co-founder, Tom Lee.

According to Lee, market size is key to unlocking SEC approval for an ETF. The total capitalization of the cryptocurrency market is currently hovering just under $250 billion, according to CoinMarketCap. Bitcoin accounts for over 65 percent of its value.

Courtesy CoinMarketCap, Total Market Capitalization

Lee argues that the commission is doing its job “establishing protections for individuals” as it issues repeated rejections of rule change applications that would allow an ETF. “The SEC needs to punt the ETF until crypto becomes bigger,” Lee remarked at the Blockshow conference in Singapore last week.

Last month, the regulator denied a Bitwise ETF application on the grounds that it failed to demonstrate how it would “prevent fraudulent and manipulative acts and practices.” The commission also questioned the application’s plans to create a fund that based its pricing structure on data from only five percent of the market — namely, exchanges believed to only host real trading.

“A surveillance-sharing agreement must be entered into with a “significant market” to assist in detecting and deterring manipulation of the ETP, because a person attempting to manipulate the ETP is reasonably likely to also engage in trading activity on that “significant market,” the commission wrote in its release.

With Bitwise itself declaring 95 percent of reported volume to be fake, the SEC cannot approve of a crypto ETF. Lee pointed out that exchange-traded products can see $13 billion worth of demand in their first year. Bitcoin’s current reported volume is a little over $18 billion, according to CoinMarketCap. But five percent of that is less than one billion dollars, meaning that a high profile ETF could overwhelm the market with derivative products. That would create an unprecedented incentive for Bitcoin whales to manipulate spot prices.

Lee estimated that the price of Bitcoin would need to be roughly $150,000 before a Bitcoin ETF was approved. That would represent a 17-fold increase from its current price of around $8,500.

While he conceded that “demand for an ETF is monstrous,” his views suggest a Bitcoin exchange-traded fund could be years away, unless it enjoys a sudden uptick in price.

The well-known analyst is regarded as a perennial Bitcoin bull, but he has recently begun cooling some of his rhetoric. Last week’s statements echoed his belief in Bitcoin as a long-term investment.

He also underscored the healthy role the SEC is playing. By repeatedly denying ETF applications, the regulator is actually helping crypto become mainstream. Lee remarked that “If you’re involved in crypto, the SEC can look like an obstacle… but if the SEC is someone that people trust… that’s how you get the mainstream willing to get involved in crypto.”

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