Bitcoin ETF can feel good for BTC enthusiasts, but the introduction cannot be carried out in the form of benefits in kind-
Bitcoin ETF can feel good for BTC enthusiasts, but the introduction cannot be carried out in the form of benefits in kind-
Although the crypto community is strongly cheered, the simplicity of the Bitcoin ETF hides many disadvantages, especially for long-term investors who are not familiar with the interior of the appointment market and the stony results of historical ETF introductions.
The Saga from First Crypto continues because the accessibility expands
With the first proshares Bitcoin Exchange Traded Fund (ETF) with ticker Bito, which is opened on October 19, investors with brokerage accounts can finally access the cryptoutril As on any other available share or etf.
For Bitcoin lovers, the announcement of the SEC catalyzed a positive change in the market, since the price of btc reached an all-time high from Over 66,000 USD in the middle of an increased CME fututures and option activity. Likewise, crypto experts believe that with the introduction of Bitcoin ETF Bitcoin as an investment option, Bitcoin will increase.
according to Ben Caselin, aax’s Head of research and strategy:
The crypto community has been asking the regulatory authorities to approve a Bitcoin ETF for years, and many expect their arrival to inspire a new investor class. While many normal investors are afraid of dealing with Bitcoin due to the complexity of the management of wallets and the protection of private keys, you can now simply register with your broker accounts and buy the ETF like any other share.
User-friendliness does not necessarily mean that acceptance or the steep price increases will achieve that expect crypto-Hodler.
The deceptive value of the futures trade in a share
An Exchange Traded Fund (ETF) is a security that depicts the performance of a certain asset or a group of different assets. At the first Bitcoin ETF listed in the USA, the ETF is bound to front month-futures contracts, which are billed in cash at the end of the month and rolled into the contract of the following month. This differs from spot prices that reflect the current market price for an asset. It is even more important that investors of the Bito ETF are not entitled to the underlying in this case: Bitcoin.
The associated easy usability also has a high price. On the one hand because of the Contango structure of the Bitcoin-Futures-Markt Futures prices reflected compared to the spot prices, ETF investors will probably pay a premium to participate in a Bitcoin upgrading.
Next, the administrative fee of the ETF of 0.95 %, which does not appear much, has a serious effect on long -term investors. This number is less relevant for short -term day traders that speculate on the rampant volatility of Bitcoin. However, this fee eats the returns for long -term investors over time who rely on increasing value, since the ETF has to transmit contracts every month.
This fee and the contango can lead to long -term underperformance compared to the holding of underlying Bitcoin, which can achieve double -digit installments within years. Although the difference between spot and futures prices, for example, was much lower, for example, a gold futures ETF without gold stocks played the same reality compared to a trust with physical gold, which became a target = "_ blank" href = "https://www.barrons.com/articles/bitcoin-etf- 5163490482?tesla=Y" Rel = "noopener"> double-digit underperformance of 13 % over a 5-year horizon .
Note on the ETF, CEO of the US subsidiary of currency.com , Steve Gregory, noted:
People are becoming more curious and hopefully when you see that the futures bitcoin ETF is not a good business for investors, you will explore opportunities to buy real bitcoins. As soon as you take this path, you will see all the easy-to-use and amazing products that have developed crypto exchanges. This ETF could serve as a goal to bring more traditional investors to Bitcoin.
While the Bitcoin ETF could very well contribute to promoting the ball with regard to the broader recognition of crypto, its impact on the prices is unclear because it moves according to the reference courses in the appointment market and not according to the cash market. For example, the US Gold Trust GLD, which has the gold to secure each share, has been shown to have an impact on the Spot Goldmarkt.
Futures activity could influence Bitcoin prices in a similar way, especially if the newly introduced ETF triggers a rage of eating at institutional investors. However, Bito can be sold empty, which means that investors can take both sides of the market. Due to the surcharge of the futures prices compared to the cash prices, some investors can choose to use the arbitrage opportunity by selling ETF empty and buying real bitcoins. This could put ETF prices under pressure, but may have a positive effect on the spot market.
Although it is still too early to be able to say with certainty how one market for Bitcoin will affect the other, the first day of the Bito-Bitcoin ETF was positive and was one of the most successful ETF starts in history after it has been achieved almost 1 billion US dollar trading volume .
"Good for Bitcoin" may not be good for the introduction of blockchain
While the new green Bitcoin ETF is a great message for the Bitcoin community, it only benefits a cryptocurrency that already has the largest market share. Other promising cryptocurrencies such as Ethereum, Cardano and other old coins do not get their own ETFs at least for the time being, namely due to the lack of regulatory clarity of their categorization.
kucooin ceo johnny lyu adds:
We assume that more cryptocurrency ETFs will be launched in the future, since crypto-related investment products from more traditional investors are increasingly interested in securing themselves against an economic downturn. However, it took years for the SEC to introduce btc Futures-ETFS, and we may not be able to expect another one at short notice Krypto ETF comes onto the market until the financial supervisory authorities have more control over the stable result of the current experiment.
Only time will show whether Bitcoin ETFs only act as the primary catalyst for the growth of Bitcoin or a crucial role in accelerating the mass acceptance of cryptocurrencies in general.
What do you think of the introduction of Bitcoin ETFs? Let us know in the comment area below.
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