An hour after the US financial regulator rejected Grayscale Investments' application to allow its Bitcoin ETF to trade on the New York Stock Exchange, the investment firm filed a lawsuit to challenge the decision.
Bitcoin bulls had pinned their hopes on the Securities and Exchange Commission (SEC) approving US bitcoin ETF, but the watchdog noted investors would not receive sufficient protection under Grayscale's proposal.
In October 2021, Grayscale, which manages the world's largest bitcoin fund, filed to make its Bitcoin Trust, called GBTC, an ETF, but that ruling was delayed multiple times.
As opposed to other bitcoin ETFs, which invest in bitcoin derivatives such as futures contracts or bitcoin miners, the Greyscale fund holds actual bitcoin.
Grayscale had piled pressure on the watchdog and even called for supporters to email in and express their support.
The company maintains the SEC's position is inconsistent with previous decisions to approve other bitcoin-based ETFs that are based on futures or ones that allow investors to short the cryptocurrency.
Rejection of the bitcoin ETF application by the SEC is just the latest in a string of negative news involving crypto as prices tumbled in recent months.
Three Arrows Capital, a crypto hedge fund that had been struggling, has also collapsed into liquidation.
Since the peak of the bubble in November 2021, cryptocurrencies have lost a combined US$2 trillion in value.