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Cointelegraph Consulting: Listed ETFs – What’s Next for Bitcoin?

After falling below $30,000 in June, Bitcoin (BTC) went into a nearly four-month rally, with an appreciation of over 100%. On October 15, it was able to retest the $60,000 level after closing the day with a 7.56% spike. The ensuing rally was attributed to enthusiasm around the SEC giving the green light on the ProShares Bitcoin Futures ETF. Bitcoin has since successfully defended its current price levels and has managed to get closer and closer to its all-time high valuation of $64,899.

The listing of the ProShares Bitcoin Strategy ETF on October 19 is believed to have given an added emphasis to mainstream legitimacy of bitcoin and cryptocurrencies. However, an important fact about the new bitcoin ETF is that it does not invest directly in bitcoin, but instead allocates a portion of its assets to BTC futures contracts.


Listed on the New York Stock Exchange as “BITO”, the ProShares Bitcoin Strategy ETF is the first of its kind, which some argue is 10 years in the making because many bitcoin ETFs are mostly blocked or blocked entirely by United States securities. Were. exchange Commission.

Some high-profile applications that are still in limbo are WisdomTree and VanEck’s bitcoin ETFs. ProShares got the green light because of one specific difference: The ProShares Bitcoin ETF is a futures-based ETF, and is also filed under mutual fund regulations.

The SEC prefers this structure because it lacks jurisdiction over cryptocurrency trading venues that are not registered as exchanges in the United States.

fund breakdown

As stated in the ETF’s prospectus filed with the SEC, the fund will allocate 25%-30% of its assets to bitcoin futures contracts. It also notes that it plans to invest in the securities of ETFs organized and listed for trading in Canada, as well as in other deposit investment vehicles.

The purpose of these positions is to manage inflows and outflows in response to unusual market conditions, increased margin requirements, or if it becomes too impractical for the fund to obtain exposure to BTC futures. The bulk of the fund’s assets will go to money market instruments, which are then divided into US Treasury bills, repurchase agreements and reverse repurchase agreements.

fostering mainstream acceptance

As mentioned, a bitcoin ETF helps gain access to the entire market, much like the stock exchange’s Coinbase listing earlier this year. This is because investors who do not have direct access to cryptocurrencies but have brokerage accounts will have the opportunity to get exposure to bitcoin.

ProShares CEO Michael Sapir said in a statement that BITO provides exposure to investors who buy stocks and ETFs, but do not necessarily want to go through the hassle of buying bitcoin from an exchange or setting up a wallet.

BITO may also be a precursor to other investment product offerings. For one, the largest digital currency asset manager, Grayscale Investments, is already planning to convert its flagship GBTC to an ETF “as soon as there is a clear, formal signal from the SEC,” Jennifer Rosenthal, Grayscale Communications Director, confirmed. Of. Grayscale CEO Michael Sonnenshein also said That ether-based ETF could potentially follow suit after the successful listing of BitOs.

Apart from these, another futures-based bitcoin ETF is also set to launch this week. An SEC filing shows that it has accepted a registration request to list Valkyrie’s Bitcoin Strategy ETF shares on the Nasdaq. France-based investment firm Melanie Capital is also set to launch its own bitcoin-linked ETF after receiving approval from French financial regulator AMF on October 22. The fund, called the Melanian BTC Equities Universe UCITS ETF, invests in a diverse basket of equities related to the daily price movements of bitcoin, and will be listed on Euronext Paris.

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Open interest is rising

Positive trading activity in bitcoin has also increased open interest on BTC futures. Data from cryptocurrency exchange Bybit shows that open interest for BTC futures reached $23.1 billion on October 18th. The figure peaked in April when the total open interest across multiple exchanges totaled $27.38 billion.

So far, the exchanges with the highest dollar-denominated contracts are led by Binance with $5.3 billion. Chicago Mercantile Exchange Group (CME) is in third place with $3.5 billion, while its futures open interest recently reached an eight-month high. Open interest refers to the number of futures contracts that have yet to be settled. It is often used to determine the strength of a trend or market sentiment.

The resurgence of bitcoin has led many investors to believe that the price of BTC could rise further – even though many believe the price of the newly listed bitcoin ETF was the same weeks ago. Thus, the bullish narrative is making a comeback, which echoes what investors were betting on at the start of the year.

With a settlement date in December, the futures contract pushed the year’s opening price up to $74,000. This has eased in the middle of the cooling-off period in the market, but has again aligned with the rising spot price.

Bets for a bitcoin price tag of $100,000 are in such fashion that centralized financial organizations such as Standard Chartered offered similar price targets this year or early 2022.

One measure to assess some of the viability of higher prices in the future is the growth of wallet addresses. Adoption has a major role in this, and while Brazil is not ready to join forces in making bitcoin legal tender in El Salvador, such moves could lead to an increase in the number of new wallets.

The data shows that since October 2020, there has been a steady increase in the number of wallet addresses. There are now about 77 million addresses. In addition, there is also data showing “holders” or addresses who have held their BTC holdings for at least one year, increasing in number as well.

Therefore, as new investment products involving bitcoin may get a similar green light in the near future, more institutional involvement may be on the horizon. Even with just BITO, a new class of investors opens up, including heavyweight (401k) pension funds and retirement accounts. But regardless of whether or not bitcoin reaches $100,000, the new bitcoin ETF at least shows bitcoin as a respectable investment.

Cointelegraph’s Market Insights newsletter shares our knowledge on the fundamentals that drive the digital asset market forward. The newsletter dives into the latest data on social media sentiment, on-chain metrics and derivatives.

We also review the most important news from the industry, including mergers and acquisitions, changes in the regulatory landscape, and enterprise blockchain integration. Sign up now to be the first to receive this information. All previous versions of Market Insights are also available on Cointelegraph.com.

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