After years of delays and false signs of progress, asset managers looking to start the first cryptocurrency exchange-traded fund are heading back to the drawing board.

Van Eck Associates Corp. -- once seen as a frontrunner -- shelved its plans for a Bitcoin ETF earlier this month, leaving just two contenders seeking approval from the U.S. regulator, data compiled by Bloomberg Intelligence show. That’s a far cry from 18 months ago, when a mass of would-be issuers were duking it out to be first to market.

Since then, Bitcoin has been on a roller coaster -- falling 50%, climbing to its highest in more than a year, and then falling another 40%. Supporters argue that a crypto ETF would give the nascent industry cache and would boost use by retail and institutional investors, but the Securities and Exchange Commission hasn’t budged. It’s denied or repeatedly delayed plans for Bitcoin funds, prompting money managers to overhaul their game plans.

“It’s far more likely that an ETF would be denied than approved,” said Bloomberg Intelligence analyst James Seyffart. “The primary thing this SEC is concerned about is manipulation and trading in unregulated markets.”

More than 20 separate crypto products have so far sought approval, from funds that plan to hold Bitcoin via a digital vault, to those that would buy Bitcoin futures, to those that want to use leverage to juice returns, data compiled by Bloomberg Intelligence show. But none of them has been able to pass muster with the SEC.

Troubled Times

It doesn’t help that the crypto universe has been plagued by scandals of hacking, theft and manipulation. Meanwhile, the wild and often unpredictable price swings that have at times exceeded double-digit percentages in a single day have spurred the regulator to keep a close eye on volatility.

Asset managers have worked to address the regulator’s worries, including on the issue of custody, but SEC Chairman Jay Clayton said recently that the watchdog still has outstanding concerns. The regulator didn’t immediately respond to a request for comment.

“The primary concern is that there are too many concerns,” said Ryan Giannotto, director of research at GraniteShares Inc., which had two Bitcoin ETF proposals denied. “The regulator fundamentally just does not like the idea of a crypto ETF -- that’s the long and short of it.”

Different Strategies

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