What are the impacts of the Bitcoin ETF?

in #bitcoin6 years ago


The most important news these days that has recently affected the cryptocurrency market is the introduction of the cryptocurrency ETF. This may be the event of the year in the bitcoin market in 2018. It is generally considered to be one of the main factors driving the rise of bitcoin (On July 18, Bitcoin rose directly from more than $6,700 to $7,500) and the recovery of the digital market.

What is ETF?

An exchange-traded fund is an investment fund with the objective of tracking a financial index which could represent equities, commodities or a specific sector such as real estate.ETF allows investors to get exposure to specific assets without the need to buy directly these assets. ETF is passive investment vehicle which provides an indirect exposure.

What is Cryptocurrency ETF?

A cryptocurrency ETF is a collective investment fund which tracks a cryptocurrency Index. Buying shares or units of a cryptocurrency ETF allows investors to get an exposure to cryptocurrencies market and to benefits from the performance of the cryptocurrencies without buying and selling them directly in various exchange. ETF facilitates the access to cryptocurrency markets Bitcoin is the most famous cryptocurrency, so the Bitcoin ETF can be called a cryptocurrency ETF.

ETF Advantages

  1. Lower Fees
    ETFs have much lower expense ratios compared to other collective investment funds. As they are passively managed they have lower fees compared to actively managed investment funds.

  2. Good liquidity
    Liquidity is a significant part of what makes ETF an attractive investment. Share or Unit of an ETF could be traded more easily than traditional asset such as equities or bonds. Ordinary collective investment funds publish the net asset value (NAV/Price) every day instead of ETF refreshes the price almost in real time during the opening market hours.

  3. Effective tracking of the index, very transparent


Image source: Cointelegragh

The impact of the Bitcoin ETF on the cryptocurrency market

On March 10, 2018, the US Securities and Exchange Commission (SEC) refused to approve the Winklevoss brothers ’Bitcoin exchange-traded funds (ETF) listing application, bitcoin prices have entered a period of downturn.

On March 29 of the same year, the SEC rejected the listing application of the Bitcoin ETF submitted by SolidX in 2016.

On July 9, the SEC received a license for ETF license for the Chicago Board Options Exchange (CBOE) global market.

On July 13, the SEC says that it will decide on August 10 whether to apply for the Bitcoin ETF submitted by the CBOE. A total of 100 ETFs were submitted by CBOE for $200,000 each.

Public documents on July 24 showed that the SEC postponed until September to decide whether to approve five ETFs related to Bitcoin.

According to a latest release published on July 26, the SEC has rejected the application for Bitcoin ETF by the Winklevoss brother, which lead the bitcoin price has dropped by nearly 4 percent, from $8,300 to $7,900.

Rather, the market has been highly optimistic regarding the VanEck-SolidX bitcoin ETF and the CBOE ETF.

We see that if the Bitcoin ETF is successfully listed, it will bring a huge number of users to the bitcoin market. If the ETF is approved, it means that, there will be a lot of capital market funds involved. Critics generally believe that as long as the SEC can release the Bitcoin ETF, bitcoin prices will break through the previous high in a short period of time. $8,000 is a likely initial key resistance level. And the Bitcoin price will even be reaching $50,000.

However, the impact of ETFs on the market also needs to be separated. When the positions reach a certain level, the ETF will lose its positive effect, and the reduction of ETF will further affect the retail investors' sentiment. However, if the ETF's position reaches a limit, there may be no driving force for the price of the entire bitcoin. Instead, investors will worry that the reduction will affect the price and will not enter the market.

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