Will ETF Become Bitcoin’s Holy Grail?
Many are waiting with baited breath for Bitcoin ETFs to be announced but will they have a monumental effect.
Slightly like a Satoshi cycle, which says the more interest in Bitcoin the more the Bitcoin price rises, which leads to more interest, big money from Wall Street and the likes have been pumping up Bitcoin.
There have been tangible booms in Bitcoin when Wall Street has waded into the realm of digital currency. Mainstream bumps have been precluded by big names in the world of banking and money giving their support.
In fact, when there has been negativity supported by the other side of Wall Street, the Bitcoin price has bombed, such as the Jamie Dimon vitriol.
As the boom continues though, there are now vehicles that are helping even the most stubborn of traditional investors join the digital forray, the latest being the announcement of futures.
However, the time seems ripe for another vehicle, one that failed earlier on when the Winklevoss twins tried the Bitcoin ETF.
What the ETF?
Firstly, an ETF is a kind of investment vehicle that uses Bitcoin as an underlying asset. ETFs, in general, are financial derivatives, which track the value of an underlying asset or several assets and are tradable during the working hours on a stock exchange.
They have two major uses: the first one is to provide investors with a basic return at minimal cost. This return comes from the long-term increase in the value of the underlying assets. The second opportunity for profit comes from day trading. Any ETF’s value changes during the day, mimicking the movement of its fundamental assets and short-term traders are able to speculate on that.
These vehicles have been tools of traders and investors for commodities like oil and gold for ages. They provide an easy way to capitalize on the value of those commodities in a convenient environment of a stock exchange, where the investors don’t have to deal with actual gold ounces or oil barrels.
What will an ETF do for the Bitcoin market?
Clearly, this type of investment vehicle is designed to make the cushy lives of investors even cushier. This alone, along with its familiarity for these investors, makes Bitcoin far more attractive and a lot less risky.
This has been actively seen with just the news of Bitcoin futures being announced. When CME announced it would offer futures on Bitcoin in the future, the currency shot to over $7,000 as Wall Streeters and other investors alike liked their lips at the chance to trade a futuristic commodity in a familiar way.
Now, with that paradigm being shattered, and the CME taking the plunge, there is bound to be a dam wall break when it comes to other futures, as well as ETFs.
The time is nigh
ETFs were famously tabled before, but the well regarded and highly Bitcoin wealth, Winklevoss twins. However, the SEC turned them down. This was back in March when the fast-changing Bitcoin environment looked very different.
Now, however, with the CME allowed to go ahead with futures, the time is certainly right for ETFs, and it is not even just speculation, the SEC is mulling it over.
Bitcoin ETFs would open up a whole new can of worms when it comes to investing and holding Bitcoin, welcoming in those who are still highly skeptical and cautious about the volatile digital asset.
This announcement alone could see the price rocket as money would pour into the ecosystem and the demand would be driven sky high.
However, there is opposition to holding the digital asset in this form. Simon Dixon, CEO and co-founder BnkToTheFuture, in his view rather thinks that an ETF is a very bad way to hold Bitcoin.
Dixon says that an ETF would introduce counterparty risk into Bitcoin - one of the only zero counterparty risk assets. He perceives the phenomenon as an example where traditional regulations decrease consumer protections as a result of trying to shoehorn Bitcoin into a traditional investment vehicle.