Should We Get Excited About Bitcoin ETFs?

Bitcoin ETF to Come

It stands to reason that with more public interest in Bitcoin, the more Bitcoin’s value will rise, (somewhat like the humble Satoshi Cycle).

This, in turn, will lead to more interest from the, “big guys;” Wall Street, larger financial institutions, etc.

So far, this has been the case.

We’ve seen representatives from all types of large industries pumping Bitcoin as the next big thing.

We can see visible peaks on the Bitcoin charts when Wall Street starts to whisper about it and other digital currencies. Every nod from Wall Street brings with it supportive interest from big names throughout the banking and financial segments.

In fact, when Wall Street pundits criticize digital currency the price drops. This happened with the Jamie Dimon vitriol.

Despite all this, Bitcoin is enjoying a pretty good season. Many investors want to get in on the action; but, they either don’t know how to, or don’t feel safe jumping onto an unfamiliar crypto-currency trading exchange.

However, brokers are now adding digital currency to traditional investment vehicles like futures to bridge this gap.

In addition, since Bitcoin is enjoying such a good season, investors are looking into once failed vehicles like the Bitcoin ETFs to see if they have potential for success.

How will Bitcoin ETFs Work?

A Bitcoin ETF uses Bitcoin as an underlying asset. Regular ETFs track an underlying asset’s value. Investors can trade them during stock exchange business hours. They have two basic uses:

  • To give investors a basic return on a small investment, (the underlying asset increases in value over the long term); and
  • To give investors profits on day trades, (the ETF’s value will change throughout the day as the value of the underlying asset changes. Investors can then earn value on short term trades as well.)

Traditionally, investors and traders in commodities like gold and oil have used ETFs. They exist to allow investors to earn money based on the value of commodities on a traditional exchange like a stock exchange. Investors don’t have to handle physical gold or oil barrels.

What are the Benefits of Bitcoin ETFs?

On a basic level, Bitcoin ETFs will allow investors to make more money. Because ETFs are familiar investment vehicles, people will be more inclined to take the chance with the new asset class. They will feel they are taking less risk. The existence of ETFs will also increase the market value of Bitcoin.

Time until Bitcion ETF

We saw this happen when CME announced they were offering futures on Bitcoin. Bitcoin’s market value rocketed past $7,000 in a short time. On and off-Wall Street investors were excited to trade futuristic assets in a traditional way.

Now that there’s been a paradigm shift in the landscape of crytpo-currency trading, there will likely be a landslide of interest in ETFs, futures, day trades and every sort of digital currency investment.

Timing is Everything

When the Winklevoss twins introduced Bitcoin ETFs in March, the Bitcoin landscape looked different. The SEC turned down the idea. However, just releasing the information that the twins were submitting an ETF application caused Bitcoin’s market value to reach heights that it never had before.

Now that CME has gotten permission to move forward with futures, there’s a solid chance that Bitcoin ETFs will get their second chance. The SEC is considering it.

New Horizons

ETFs will open up a whole new world of investing for people who are still a little skeptical about investing in crypto-currency. These investors typically view digital assets as volatile and unpredictable. Just the ETF announcement alone will likely cause the value of Bitcoin to rise.

However, there is still some opposition. Simon Dixon is Co-Founder and CEO of BnkToTheFuture. Dixon doesn’t think ETFs are a good way to hold Bitcoin. He feels they will introduce counterparty risk to Bitcoin, (one of the only asset classes with no counterparty risk). He feels that the haste to funnel Bitcoin into a familiar investment vehicle could decrease consumer protections.

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About Bart 7 Articles

Administrator at the Province Town coin exchange. Have been trading cryptocurrencies for a number of years. Ex developer and current cryptophile.

3 Comments

  1. Sam, was this not what the Winkelvoss twins of Facebook fame were busy with? It sounds interesting indeed. I think that if there is an etf it will make the markets go crazy.

    • Yes. They own Gemini exchange and at the beginning of they year they wanted to list an ETF. They applied to the SEC but unfortunately they declined to list it. Not the best unfortunately.

  2. I have invested in Bitcoin back in 2011 when it was only $100. I would have no problem investing again at this level. I know that the moment the SEC authorises these ETFs, it will no doubt go flying.

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