Following the establishment of an ETF in the United States, the bitcoin’s price was trading at around $66,975.
Bitcoin’s entry into mainstream finance has hit yet another significant milestone – and a new high price. Following the creation of an exchange-traded fund (ETF) in the United States, which has drastically boosted bitcoin’s exposure to investors, the cryptocurrency was trading at US$66,975 (£48,456).
The fund, which debuted on October 19, allows investors to bet on bitcoin’s price future worth without actually holding the cryptocurrency. It is the first time that investors have been allowed to trade a bitcoin-related product on the New York Stock Exchange, and it was preceded by a lot of media interest and financial market buzz.
It started trading at US$40 (£29) a share and ended the day up 5% with assets of US$570 million (£412 million), making it the second most highly traded new ETF on record (the first was launched by BlackRock, the world’s largest asset management firm).
And the bitcoin’s price has risen dramatically as a result. It rocketed above its previous high of $64,895 to a new high of $66,975, and was hovering around $65,000 at the time of writing. This is a significant improvement from the mid-July 2021 low of around $30,000, which reflected bitcoin’s extreme volatility.
Many financial organizations have attempted and failed to obtain clearance for bitcoin ETFs in the past. Until now, the Securities and Exchange Commission (SEC), which safeguards investors in the United States, has been hesitant to authorize any. This was partially owing to bitcoin’s extreme volatility, as well as larger concerns about the uncontrolled cryptocurrency sector.
However, because “future-based” ETFs trade on a regulated market, Gary Gensler, head of the Securities and Exchange Commission, said the commission would be more comfortable with them. Since Gensler took over as chairman in April 2021, the SEC has taken a substantial turn in the right direction.
ETFs trade like regular stocks, are regulated, and may be traded by anybody with a brokerage account. The ProShares Bitcoin’s price Strategy ETF (or BITO for short) is the first to provide mainstream investors with exposure to the highs and lows of bitcoin’s value without requiring them to go through the lengthy process of acquiring the coins directly.
Although US investors could already buy bitcoin futures from the regulated Chicago Mercantile Exchange and unregulated exchanges like BitMEX (as well as bitcoin’s price directly from unregulated exchanges), the launch of an ETF opens up the market to a wider range of investors, including pension funds, and adds to bitcoin’s growing acceptance in the financial markets.
Some people are still dubious about bitcoin because of its association with criminal behavior, however a new research shows that this is fading. And JP Morgan CEO Jamie Dimon argues that bitcoin is “worthless” and that regulators will “regulate the hell out of it.” (However, in July 2021, JP Morgan granted access to cryptocurrency funds to its wealth management customers.)
Blockbuster in the banking industry
Bitcoin’s price increase does not surprise Eric Balchunas, a senior analyst at Bloomberg, who described the ETF launch as “a blockbuster, smash, home run debut [that] adds a lot of respectability and eyeballs into the crypto industry.”
But how will BITO affect the bitcoin market? It has already exposed more investors to the ups and downs of bitcoin’s value in a regulated market because it is a new product. Many of them are likely to have previously been hesitant to purchase cryptocurrencies from unregulated exchanges and keep them themselves.
It’s a move that’ll undoubtedly make investing in cryptocurrencies easier and more frequent – and a crucial step toward their general adoption. Andrew Urquhart, Professor of Finance & Financial Technology, ICMA Centre, Henley Business School, University of Reading, wrote an article for The Conversation.
The Conversation has given permission to reprint this article under a Creative Commons license. Read the full story here.
