In terms of news, the latest and greatest about crypto is the very hyped launch of the Bitcoin ETF, which was delayed numerous times by the Securities and Exchange Commission (SEC). I decided to write some thoughts on how this investment vehicle could influence the market.
An Exchange-Traded Fund (ETF), according to Investopedia, is a marketable security that tracks a stock index, a commodity, bonds, or a basket of assets. Therefore, they differ from mutual funds in the sense that they trade like common stock on an exchange.
What does this mean? Most noteworthy, it means that sooner or later (we don’t know if this ETF will launch tomorrow or in 20 years, as said by Republican SEC commissioner Hester Peirce, or Crypto Mom, how she got named by the fellow Internet community) we will trade on the New York Stock Exchange a ticker which reflects, more or less, the price of Bitcoin. Now, is this a good thing for the markets?
Crypto fans are very excited about this, because it could make a complete change in the market. As a result, this could mean the removal of the complications and implications associated to investing in bitcoin that were up to now (opening an account at an exchange, getting a secure hardware wallet to store it and so on).
The SEC is trying to delay the launch of the Bitcoin ETF so much because the government still does not really resonate with the idea of cryptocurrencies. The applicants are trying to expedite the whole process, saying that commodity ETFs already exist (like the ones for gold, silver or crude oil) and they exist for exactly the same reason: to make the market access for investors a lot easier, removing any necessary complications related to storage and acquisition, and allowing them to solely focus on the price fluctuations.
I believe this is the most pertinent reason for introducing a Bitcoin ETF: in order to expand the horizon of traditional investors. But I am also thinking about the traditional investor, or the basic mutual fund, investing in this security: will it be a good thing to expose this “audience” to such volatility?
Or, maybe the solution is not in this question. Perhaps only such exposure will reduce the volatility of Bitcoin.
On this matter, I am wondering how they will be able to piece the puzzle along. Because stock exchanges are open only during work hours, but cryptocurrencies are traded 24/7/365. Will or should the investor be exposed to the after hours change? Is it right or wrong? And why?
Now, maybe it is clear why the SEC rejected a Bitcoin ETF launch in the past. Twice. And guess who were the first to embrace this idea? The Winklevoss Twins. Remember them?
That’s right. The rowers who claimed to be the rightful inventors of Facebook. Apparently, they re-branded themselves in the last few years. From rowers, they became Internet entrepreneurs…. and now they are professional crypto investors..
Anyone can safely assume these guys are the lucky speculators. They had a lot of inherited money, sued Mark Zuckerberg to get more money, put some into Bitcoin, only to declare they have already reserved seats on the Virgin Galactic. And it doesn’t stop here…these guys got a patent for “safely securing cryptocurrencies”. They must be the new Nikola Tesla or something.
Now, don’t get me wrong. It’s fun to see who are the first Bitcoin billionaires. And I salute their courage to invest in this technology very early. I didn’t have the guts until August 2016. I still remember how the early days of the market were. No regulations, no security, no real value…
So, what do you think? Is the supposed Bitcoin ETF a good idea? Why/why not? Make sure to leave a comment below or if you wish to have a chat with me, don’t hesitate to use this link.