We tell, what is bitcoin ETF, what are its advantages and how to make money on it. The emergence of an index fund will instantly attract more investors to cryptocurrency and, the main thing, of money.
Satoshi Nakamoto once described Bitcoin's characteristic cycle: the higher the interest in bitcoin, the more its price rises, provoking a new round of interest and so on. Now Wall Street has intervened in this cycle., and she literally pumps bitcoin with money.
When Wall Street first entered this realm, bitcoin jumped up, and big names of investors (as well as their money) more than once kept the digital currency from falling. But for the sake of justice it's worth noticing, that when the other side of the "street" was critical (how it was, eg, in the case of Jamie Dimon), bitcoin value reacted accordingly.
Nevertheless, the boom continued, new instruments appeared, which allowed even the most stubborn traditional investors to take part in the general fever. The final step was the emergence of futures.
AND, seem to be, it's time for another tool, which the Winklevoss twins once tried unsuccessfully to register - Bitcoin ETF.
What is ETF
ETF Is an investment instrument, using bitcoin as an underlying asset. Overall Traded Index Funds (ETF) are derivative financial instruments, which track the value of one or more underlying assets and are traded on the stock exchange within a trading session.
There are two main areas of investment, on which such funds are guided. The first is a small income at minimal cost due to a long-term increase in the value of underlying assets. The second opportunity for profit is intraday trading. The cost of any ETF, following the movement in the price of the underlying asset, changes during the day, and short term trader can speculate on this.
Such tools have long been used by traders to generate income from raw materials., like oil or gold - it was a way of dealing not with ounces and barrels, and with easy-to-trade securities.
What ETF means for bitcoin
Obviously, this investment tool is designed to further facilitate investing in bitcoin. Moreover, it will make bitcoin more attractive - due to its simplicity and ease of use.
When CME announced, what plans to offer such bitcoin futures, cryptocurrency price exceeded $7000 - it became clear, that Wall Street investors can't wait for the familiar tool to trade this futuristic asset.
And the next step now is creating an ETF.
It won't be long to wait
The idea of creating a Bitcoin ETF is not new: back in March of this year, the Winklevoss twins tried to register the first traded index fund for bitcoin, but the US Securities and Exchange Commission rejected the initiative. But it was a long time ago, and then the situation looked completely different - in the world of bitcoin, the situation is changing rapidly.
Nevertheless, even the specter of hope for the creation of such a fund led to the, what is that month bitcoin set price records twice.
Now, when CME allowed the registration of futures, obviously, that ETF creation is not far off - and it is known, that the Commission is considering such a possibility.
The emergence of an index fund would open the way for bitcoin investments even for those investors, who are still distrustful of the strange volatile digital asset.
Even a simple announcement of such a fund will lead to a soaring price in connection with the expectations of a new wave of investment money entering the ecosystem..
However, there is also opposition.. Simon Dixon, CEO and Co-Founder of BnkToTheFuture, considers, that ETFs are a very bad way to invest in bitcoin.
According to Dixon, ETF will bring counterparty risk to Bitcoin. And that's stupid, because bitcoin is by nature the only asset, initially devoid of such risk. It turns out, that traditional regulation, driving bitcoin into the framework of traditional investment procedures, does not increase, but reduces consumer protection
Who Will Launch Bitcoin ETF?
Immediately after the appearance of Bitcoin futures, the New York Stock Exchange asked the US Securities and Exchange Commission (SEC) permission to list two exchange-traded funds, Bitcoin related. ProShares Bitcoin ETF and ProShares Short Bitcoin ETF Not Available To Investors Yet, but if the SEC approves the listing, trading in them starts early next year.
ProShares is one of 10 largest asset management companies in the USA, - actually applied for registration of their funds in September. This happened long before the appearance of Bitcoin futures., однако ProShares предвидела, that by the end of the year the largest exchanges will offer cryptocurrency derivatives. Другие компании, including VanEck, First Trust и REX Shares, also applied to register their own EFTs, based on bitcoin futures.
How ETFs Will Work and How They Will Change the Market?
ProShares funds will be modeled after other ETFs, linked to futures contracts. The management team will open positions in bitcoin futures, meeting the investment priorities of each fund. ProShares Bitcoin ETF aims to drive equity value growth, соответствующее динамике фьючерсов. ProShares амбициозно заявляет, what will seek, so that the one-day and long-term results of the fund coincide with the dynamics of the underlying asset. ProShares Short Bitcoin ETF will have reverse target: the value of shares will grow along with the fall in bitcoin prices. In this case, ProShares is careful about the coincidence of the daily results., however, the long-term performance of the fund may differ from the behavior of bitcoin. The presence of ETFs will significantly increase the number of investors, wishing to earn on cryptocurrency. There are currently tools like the Bitcoin Investment Trust, however, they have their own structural problems, complicating the tracking of cryptocurrency. Likewise, digital stocks don't always follow the movements of underlying cryptocurrencies..
How risky Bitcoin ETFs will be?
Unfortunately, bitcoin funds will be extremely risky, which means, unsuitable for most investors. Futures-based ETFs do not always track the dynamics of the underlying asset, as the value of derivatives may differ from the spot price of the underlying asset. Например, bitcoin March futures are currently at $500 дороже, than January. Such deviations in commodity markets are the norm, but they can hurt ETF returns compared to the performance of the underlying asset. Moreover, Bitcoin futures market is not that big, like other commodity markets with their own ETFs. The average daily trading volume in bitcoin futures does not exceed several thousand contracts. For comparison, daily turnover on the oil market is several hundred thousand contracts. Low volume means a serious risk of sudden price changes, which is compounded by the high volatility of Bitcoin itself.
Should you buy a Bitcoin ETF??
The attractiveness of bitcoin funds is, that they allow you to invest in bitcoin, without buying the cryptocurrency itself. For those, who believes in her future, this will be enough incentive to buy ETFs. Other investors should be smart and wait a while, убедившись, that funds manage to track bitcoin prices. If it doesn't, it's better to stay away from them and look for more reliable ways to make money on the crypto boom.
A source: https://ru.insider.pro/investment/2017-12-22/bitkoin-etf-faq-dlya-investora/