Bitcoin hits new record above $66K

Bitcoin hits new record above $66K as market cheers ‘almost perfect’ ETF debut

Bitcoin surged to a new high of over $ 65,000 on Wednesday as the excitement of the first exchange-traded fund (ETF) peaked quickly. Investors praised the Proshares Bitcoin Strategy (BITO) ETF launched on the New York Stock Exchange (NYSE) in a previous session as the largest cryptocurrency per market capitalization rose by more than 7%. BITO, the first BTC (BTC) -related fund available to US investors, helped boost cryptocurrency prices with a rapid rise that raised digital currencies to $ 66,928.67 in early trading. While some market participants have questioned the usefulness of the new product, it provides people with a new way to gain exposure to BTC through their securities accounts. BITO’s debut was the second largest for ETFs, reflecting a keen interest in the cryptocurrency industry. However, be careful with incoming buyers, especially first-time crypto holders. New Bitcoin ETFs tend to fluctuate significantly as they do not trade exactly like the digital currencies on the market.

The Securities and Exchange Commission (SEC) has approved the new ETF on a futures basis. In other words, it is a derivative based on the BTC price of the underlying asset. This makes it more complicated and expensive to own Bitcoin than to own it directly. However, Grayscale Investments and the New York Stock Exchange are turning the world’s largest Bitcoin fund into a fixed ETF. This has the advantage that the market is adopting a regulatory environment that favors new funds and cryptocurrencies. “The daily correlation of BITO for tracking Bitcoin will be near perfect,” Bloomberg senior ETF analyst Eric Baltunas told Yahoo Finance. addition. “The councilor probably won’t believe it,” Baltunas said. “It’s going to be exciting, but this excitement is driven by traders, not long-term investors,” he said.

Investors are looking for spot funds that offer better service to individual investors. However, the SEC has chosen to approve BITO first. This is because it is based on the laws of the 1940s, which provide a higher degree of protection for investors as a future product.

Other Bitcoin ETF candidates (GBTCs), including grayscale, are optimistic that futures-based ETFs will pave the way for spot products. But in the short term, Baltunas remains clumsy as SEC Chairman Gary Gensler appears to be less interested in Bitcoin spot ETFs. This is because it is included in the 1933 stock trading, which has less investor protection. “Gary Gensler isn’t very happy with the 1933 law,” Baltunas said. Mentioning a possible timeline for hosting Bitcoin Spot ETFs, he added:

What investors need to know

If you have never traded a futures contract or owned a futures-based ETF, the main difference is that the return on the BTC futures contract reflects the return on the market price that underlies Bitcoin in the long run. That’s not what you’re doing.

Two important terms that novice investors need to know are “contango” and “backwardation”. The first is that the futures price is higher than the expected future spot price, and the second is the opposite (the lure price is higher than the futures price). In summary, this means that investors may gain or lose value in the long run by owning a futures-based BTC ETF, even if the price of Bitcoin does not fluctuate in the same way. However, contango and deterioration also offer another opportunity for exchange called “cash and carry”. The goal is to take advantage of this price difference between BTC futures contracts and the underlying Bitcoin price, also known as futures premium. Traders can use cash and carry strategies for years. But now, with the launch of futures-based ETFs, the premium should be much higher. Once that is done, US funds and professional traders will need another way to take advantage of BTC futures contracts. However, crypto investors believe that most retail investors who are not active futures traders are unlikely to be interested in cash or trading. However, it should be understood that the rise in BTC futures contract premiums can fluctuate over the long term, based on the overall factors of professional traders playing more sophisticated games on the product. Open interest in the greatest CME futures ever

However, Shiliang Tang, chief investment officer of crypto hedge fund Ledger Prime, said futures-based ETFs will raise bitcoin prices in the short term while Wall Street investors are launching this new type of fund. Positive about how.

The Chicago Mercantile Exchange (CME), where the new fund is listed, “generally reflects the capital of institutional investors,” Tang told Yahoo Finance. He explained that CME’s open interest on Bitcoin futures is a powerful way to measure the participation rates shown by institutional investors and traders of BTC futures, at least in part, to harness money and cash. .. According to the Bybit exchange, CME’s public stock of BTC futures is currently $ 3.6 billion. The combined public interest on Bitcoin futures on all major exchanges currently exceeds $ 23 billion, not far from this year’s highest ($ 27.3 billion) just before the initial public offering of Coinbases. (Coin) April.

Credit: Yahoo Finance

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