Saturday 16 October 2021

What is the Bitcoin Futures ETF that caused the jump in Bitcoin prices?

I am sure if you are into cryptocurrencies, I am sure you have heard of the Bitcoin Futures ETF which many have said propelled Bitcoin into the $60,000 region. I have also heard of it and that it has not formally been approved by the Securities and Exchange Commission. The proposed date of the filing is on Monday, 18 Oct 2021 and might begin trading next week.

What is the Bitcoin Futures ETF?

So of course seeing the word Bitcoin means it involves Bitcoin and futures means that it is not the spot market meaning not the current prices but more so on the bitcoin futures contracts. The ETF is called ProShares Bitcoin Strategy ETF. This is a huge move in the development of cryptocurrencies as it will be available to the mass retail investors once it starts trading.

So far, the SEC has not formally approved it but according to Proshares announcement, it states that the agency is unlikely to block the listing. It will trade under the ticker "BITO". Being a futures ETF means that it is not a direct investment in Bitcoin but more of tracking the Bitcoin futures contracts where the price of a futures-based bitcoin ETF could trade at a premium during a bull market or at a discount during a bear market. Some have also argued that it is better just directly buying Bitcoin which I do agree to a certain extent, it really depends on your investment strategies.

Read more: Q3 Portfolio Review | Stocks and cryptocurrencies

Regulation coming through

Since it will be an ETF related to Bitcoin, this means that there will be some form of regulation if you purchase this ETF although things are not very clear at the moment but being able to list an ETF requires certain requirements and factors. Crypto community do welcome regulation as it means that the government is paying attention to cryptocurrencies and might slowly introduce products that involves crypto and further build on it. As regulation is being done, this also means higher adoption from the public and the other retail investors which means a huge boost to market capitalisation and price action.

Many companies have been trying to apply for Bitcoin or crypto-related ETF like Invesco and Valkyrie. The approval is for a futures ETF which can be seen as only a partial victory by the crypto community as there are currently no other ETF tracking the spot-market price of Bitcoin. However, an ETF has fees involved and also middleman fees (ETF provider, lawyer who set up the fund, administrator, auditor and the list goes on), hedge funds can also arbitrage it by buying Bitcoin then sell the futures contract making it settle at the correct price and they can make a fortune as explained by Raoul Pal . He also emphasised that cryptocurrencies are being bought because they are self-custody (eg cold wallet) which this ETF does not allow. Raoul also raises that the Futures ETF is not benefiting the small retail investor but instead allows hedge funds to benefit from it.

Read more: Investing is not just about buying but it is about selling as well | Sharing my sell positions

Just buy the crypto and HODL

If you have been thinking of getting into cryptocurrencies, watch my video on how to create a Gemini or FTX account and just buy Bitcoin or other cryptocurrencies that you have done your research on. Getting in is the first and most difficult, after which you will be immerse in it and endless learning. Do note that this is not a recommendation to buy, do your own research and invest in what you believe. I don't hold a large amount of cryptocurrencies but with the small amount that I hold, it has grown by quite a bit and the growth is exponential. Hope you enjoy today's video and give a thumbs up or subscribe to my channel for more content!


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