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Bitcoin ETF hits another snag, and approval won't come 'anytime soon,' says researcher

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Bitcoin ETF hits another snag. Here's what experts see ahead

The bitcoin ETF has gotten the boot. Again.

The Securities and Exchange Commission declined to approve Bitwise Asset Management's long-awaited bitcoin-based exchange-traded fund again on Friday, adding to a yearslong series of rejections for hopeful cryptocurrency ETF issuers.

The regulatory body cited the potential for fraud and manipulation as its main reason for the denial, rekindling concerns about the security of the cryptocurrency market as it relates to trading the underlying assets.

Some, including Todd Rosenbluth, CFRA's senior director of ETF and mutual fund research, are worried this means another long leg in the bitcoin ETF's journey to approval.

"It's not the ETF product that's the concern. It's the underlying asset that the SEC is worried about from a fraud standpoint," he said Monday on CNBC's "ETF Edge." "They don't want to pull off that Band-Aid too quickly."

That makes things particularly difficult for issuers such as Bitwise, whose global head of research appeared on "ETF Edge" last week saying the firm was closer than ever to getting its bitcoin ETF. That fund would trade under the name Bitwise Bitcoin ETF Trust if cleared by the SEC.

"I don't think we're going to see a bitcoin ETF anytime soon because it's hard for an asset manager like Bitwise and others to be able to disprove a negative," Rosenbluth said.

Chris Hempstead, a top ETF consultant who formerly ran ETF sales at Deutsche Bank, said in the same "ETF Edge" interview that proving "safe practices" would be key moving forward for issuers looking to bring bitcoin-based funds to market.

In fact, "there are successful funds" that have done so already, Hempstead said Monday.

"Grayscale has a bitcoin fund out there that is very successful," he said, referring to the digital currency investment firm's Bitcoin Investment Trust (GBTC).

"It has not been compromised and that is proven," Hempstead said. "Use that as your proof of evidence with the commission to say, 'This can work if the asset is held in a safe place.'"

The price of bitcoin has surged about 123% this year, according to Bitstamp. It fell by more than 1% in early Tuesday trading.

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