Bitcoin exchange-traded funds (ETFs) have been famously thwarted by the US Securities and Exchange Commission (SEC), despite different players trying their best to get their own versions of the ETFs live and trading.

The repeated denial has confused many. ETFs, for the uninitiated, are regulated financial instruments that track the price of an underlying asset/s and provide exposure to investors. Such products for Bitcoin and crypto have been long sought in the US, with over nine companies waiting on the sidelines as of today.

On paper, Bitcoin (or crypto) ETFs are a step above spot options. They would be regulated by a trusted authority, their underlying assets would be custodied with trusted guardians, and they would be traded on trusted exchanges (and not a random shitcoin exchange with weird server locations and unknown hard wallets).

But while many are still wondering about the decision, some say they understand why the almighty SEC is shutting down attempts of a Bitcoin ETF issuance.

“Similarly to real-world assets like gold, Bitcoin cannot be created endlessly, it requires effort to mine and has a fixed supply,” says Brian Gallagher, co-founder of Web3 development firm Partisia Blockchain.

He added, “An ETF approval would lead to the creation of new derivatives markets, where Bitcoin’s price could be altered based on other asset’s values. This could mean that there could be five times the supply of Bitcoin trading on any given day than is actually available.”

“This Bitcoin isn’t actually being purchased and transferred across wallets but rather gambled on with essentially debt-laden money and could lead to the manipulation of its price.”

Gallagher notes such an issue is common in gold markets, as its fixed supply allows traders and investors to artificially affect its market price and potentially creates a “deceptive picture” of its supply.

Meanwhile, Gallagher says Bitcoin ETFs are opposite to what the asset has set out to achieve. “A Bitcoin ETF would force Bitcoin into the confines of traditional stock markets, limiting access to Bitcoin’s liquidity when said stock markets close,” he told CryptoSlate, adding:

“Bitcoin was created to exist outside the confines of these traditional markets and in constraining it in this way, an ETF is failing to recognise this cryptocurrency for what it is.”

But those concerns aside, Bitcoin ETFs are already live and running in other countries. Earlier this year, Canadian firm Purpose Investment launched what was termed as the world’s first true Bitcoin ETF, attracting hundreds of millions of dollars in volume on the first day itself.

The fund ended up crossing the $1 billion assets under management (AUM) mark just a month afterward. But Bitcoin being Bitcoin did its thing and tumbled 40% in the months afterward, leaving Purpose with $875 million as of today.

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