Steemit Crypto Academy Contest / S15W3 : Bitcoin ETF! What impacts?
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INTRODUCTION |
We all love flowers don't we? Imagine having different flowers in one basket or a wrap, what is that called again? Bouquet! oh, yes.
When we want to buy flowers and we select all our favorites into one place, so instead of paying for each single one we pay for all as one, because we are buying a bouquet of flowers, while this can also be related to ETF. So then, what is an ETF?
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An Exchange-Traded Fund also known as ETF, is just like the Bouquet of flowers, but instead it is like a basket that holds a bunch of different investments, such as stocks or bonds.
Another good example would be, a gift basket that contain different items that put together in a basket and given as a present. A gift basket is like a bundle of goodies which may include items like chocolates, snacks, beauty products, or even small chops. Where each item in the gift basket adds its own uniqueness and makes the overall gift more exciting and enjoyable.
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Hence, an ETF is like a financial gift basket but instead of physical items, it is a collection of different investments, such as stocks, bonds, or commodities with each investment in the ETF contributing to its overall performance and diversification.
Therefore, just like a gift basket or Bouquet of flower brings together different items, an ETF brings together different investments to offer a well-rounded and diversified investment option. It is all about diversification and having a financial gift with a variety of opportunities.
That's what an ETF does with investments, it gives us a mix of different investments in a one package to help us diversify our investment and potentially reduce risk. Hope that makes it easier to understand! Let me know if you have any more questions.
What is a Bitcoin ETF, and how does it differ from owning bitcoins directly? |
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From our definition of what an ETF is all about, then A Bitcoin ETF or Exchange Traded Fund, is a way or opportunity given to investors to indirectly invest in Bitcoin without actually owning a single unit of Bitcoin directly.
That is, with a Bitcoin ETF, we get to buy shares of the fund that represents our ownership in a pool of Bitcoins held by the fund. Let's say going by the earlier examples, Bitcoin is merely a rose (share) in the bouquet (Fund) or a chocolate (share) in the gift basket (Fund), whereas you are paying for the ownership of the Bouquet or gift basket. This allows you to gain exposure to the price movements of Bitcoin without the need to manage the actual Bitcoins yourself.
Talking about owning Bitcoins directly, when you own Bitcoins directly, you have full control and ownership of the digital currency. That is, you take full responsibility of buying, selling, and storing them in a digital wallet.
It is like having physical cash in your pocket instead of the bank, but in this case, it is in a digital form. Hence, owning Bitcoins directly gives you the ability to use them for transactions, hold them as an investment, or even mine new Bitcoins.
Therefore, the main difference between a Bitcoin ETF and owning Bitcoins directly is in the level of control and ownership. With a Bitcoin ETF, you're investing in a fund that holds Bitcoins, while directly owning Bitcoins means you have full control and ownership of the digital currency itself.
How can the approval of a Bitcoin ETF by the commissioner of the American Stock Exchange SEC influence the cryptocurrency market? And why did it fall just after this approval? |
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The approval of a Bitcoin ETF by the commissioner of the American Stock Exchange SEC can have a significant influence on the entire cryptocurrency market in ways such as;
INCREASED ACCESSIBILITY:
With the approval of a Bitcoin ETF, it will make it easier for everyday investors to gain exposure to Bitcoin, allowing them to invest in Bitcoin through traditional brokerage accounts, just like buying stocks. Hence, this increased accessibility could help attract more investors to the cryptocurrency market.
MARKET LIQUIDITY:
The approval of a Bitcoin ETF could potentially bring in a large influx of institutional investors who tends to trade in large volumes, thereby increasing the liquidity of the Bitcoin market and this higher liquidity can bring about smoother transactions and reduced price volatility.
PRICE IMPACT:
Bitcoin ETF approval could also impact the price of Bitcoin in the sense that if the demand for the ETF is high, it could lead to or create an increase in demand for Bitcoin itself, which in turn can bring about an increase in the price of a Bitcoin. And again, if the ETF faces a selling pressure, it can also bring about a negative impact on the price of Bitcoin.
MARKET SENTIMENT:
The approval of Bitcoin ETF can also affect the overall market sentiment and investor confidence (fear or greed). The ETF could be seen as a positive development for the entire cryptocurrency market, as it signals an increase in acceptance and the recognition of cryptocurrencies from traditional financial institutions. Hence, this positive sentiment can bring more investors and leading to an increase in the overall market confidence.
So then, why did the price of Bitcoin fall just after this approval?
I may not be able to point to the exact reason to why Bitcoin price fell after the ETF approval, but here are some reasons to why I feel the price of Bitcoin fell after the approval of a Bitcoin ETF.
BUY THE RUMOR, SELL THE NEWS:
Sometimes, leading up to a highly anticipated event like the approval of a Bitcoin ETF, there might be a lot of speculation and excitement in the market. Traders and investors might buy Bitcoin in anticipation of a positive outcome. However, once the news is officially announced, some traders may decide to sell their holdings to lock in profits, causing a temporary dip in the price.
MARKET CORRECTION:
The approval of a Bitcoin ETF might coincide with a broader market correction. Cryptocurrency markets can be volatile, and price movements are influenced by various factors. If there is a general market downturn or negative sentiment, it can impact Bitcoin's price, regardless of the ETF approval.
INVESTOR EXPECTATIONS:
Sometimes, the market's expectations may not align with the actual impact of an event like the a Bitcoin ETF approval. If investors were expecting an immediate and significant price surge after the approval, but it doesn't meet those expectations then it can lead to some selling pressure and a temporary price decline.
PROFIT-TAKING:
After a significant event or news, some investors may decide to take profits by selling their Bitcoin holdings. This profit-taking behavior can contribute to a temporary decrease in the price.
Now, let us at a look into the actual market to see if this assumptions holds water, to this effect, below are screenshots showing the price of bitcoin movements few days before, during and after the Approval of Bitcoin ETF which was announced on January 10th, 2024.
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Screenshot A | Screenshot B |
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Screenshot C | Screenshot D |
On the first frame, Screenshot A, we can see how the price of Bitcoin rised from 8th of January, this could go on to prive that, investors are buying the rumor, how ever as at 17:00 GMT +1 on 9th January, a day to the news of the approval, we can see the price of Bitcoin started to dive from $46,491.02, which can also go on to prove that the news was sold.
On the second frame, Screenshot B, we can see that the price of Bitcoin continued to deep until after the announcement of the Bitcoin ETF, bringing about big expectations on the mind of investors which pulled the price up to $48,494.62.
Frame 3, Screenshot C, shows that it was time to take profit for by investors as the price began to dip again just a day after the news of the approval, this dip in price is believed to have brought about fear in investors as the dip continued for straight 2 weeks, from 11th January to 23rd January, bring the price from $48,494.62 to $38,740.63, a lose of $9,753.99 as shown in Screenshot D, which results to about ~20.11% loss.
How could the approval of a Bitcoin ETF by a financial authority such as the SEC contribute to the legitimacy and institutional recognition of cryptocurrencies? |
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When a financial authority like the SEC approves a Bitcoin ETF, it can contribute to the legitimacy and institutional recognition of cryptocurrencies in the following ways:
INCREASED ACCESSIBILITY:
An ETF (Exchange Traded Fund) is a type of investment that allows prospective investors to gain exposure to an asset, like Bitcoin, without directly owning it. Therefore, by approving Bitcoin ETF, the SEC is practically saying that Bitcoin is a legitimate asset worthy of being included in traditional investment portfolios, giving freedom to investors to access it. Therefore, this increase in accessibility can attract more investors, including institutional ones, who may have been skeptical about investing directly in cryptocurrencies before.
REGULATORY OVERSIGHT:
The approval of Bitcoin ETF by the financial authority such as SEC means that the ETF will be subject to regulatory oversight. Hence, this oversight can help protect investors by ensuring that the ETF is operating within certain guidelines and regulations. Overall, this can also help mitigate some of the risks associated with investing in cryptocurrencies, as the ETF will need to comply with regulatory requirements.
MARKET VALIDATION:
The approval of a Bitcoin ETF can be seen as a form of market validation as it shows that regulators recognize the potential value and importance of cryptocurrencies as an investment. Therefore, this recognition can help build trust and confidence among investors, particularly institutional investors who often rely on regulatory approval and oversight before entering new markets.
MAINSTREAM ADOPTION:
The approval of Bitcoin ETF also contributes to mainstream adoption of cryptocurrencies, because as more traditional financial institutions and investors embrace cryptocurrencies through ETFs, it can pave the way for wider acceptance and integration of digital assets into the existing financial system, which can lead to an increase in liquidity, stability, and the overall growth of the cryptocurrency market.
How might the introduction of an SEC-approved Bitcoin ETF interact with the decentralized governance of the STEEM blockchain, and how might these two approaches complement or diverge in investors' perspectives on asset management? digital assets? |
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The introduction of a SEC approved Bitcoin ETF and that of a decentralized governance in the STEEM blockchain are two different approaches that can have both complementing and diverging perspectives in terms of asset management and digital assets.
When it comes to the SEC approved Bitcoin ETF, it operates within the traditional financial system, where regulatory authorities like the SEC oversee its operations. This means that the ETF follows certain rules and regulations set by the SEC, providing investors with a sense of security and protection. It's like having a safety net in place.
While, the STEEM blockchain operates on a decentralized governance model which means there is no central authority or regulatory body overseeing its operations. Hence, decisions and rules on the Blockchain are made by the community of users through a consensus mechanism known as Delegate Proof of Stake (DPoS). Hence, it is like a democratic system where everyone has a say in the governance of the Blockchain.
Now, talking about how these two very different approaches interact, the introduction of a SEC approved Bitcoin ETF can potentially attract investors who prefer a more regulated and traditional investment environment which they believe is more comfortable to invest in as asset are overseen by a regulatory authority like the SEC.
On the other hand, the decentralized governance of the STEEM blockchain seek to appeal those who value freedom and autonomy that comes with decentralized systems, a system where the power is decentralization, hence seeing digital assets like STEEM as a way to participate in a community driven ecosystem, where decisions are made collectively with them taking part in the decision making.
In terms of asset management, some investors may prefer the stability and regulatory oversight that comes with the SEC approved Bitcoin ETF, seeing it as a more secure and familiar way to manage their investments. While, others may be attracted to the flexibility and potential for innovation that comes with a community friendly governance system, therefore seeing digital assets on the STEEM blockchain as an opportunity to partake in the dynamic and evolving ecosystem.
CONCLUSION |
Bitcoin ETF is indeed a convenient and accessible way for crypto enthusiasts and even those without any cryptocurrency knowledge to invest in Bitcoin as it is likened to having a virtual wallet that allows them own a piece of the Bitcoin market without the stress of directly buying, storing and managing the Bitcoin by themselves.
I wish to invite @yakspeace, @ninapenda, @ruthjoe, @drhira and @suboohi
Thank You for your Time
NOTE: Always have a smile on your face, as you are never fully dressed without one.
Upvoted! Thank you for supporting witness @jswit.
Wow @sahmie your analogy of ETFs as financial gift baskets is brilliant! The comparison to a bouquet of flowers makes understanding complex investment concepts so much simpler. Your breakdown of Bitcoin ETFs and their differences from direct ownership is clear and insightful. The explanation of how SEC approval can impact the crypto market is well-researched and the detailed analysis of Bitcoin's price movement post-approval is invaluable. Wishing you the best of luck
Greetings friend, thank you for your kind words. I'm glad you liked my analogy of ETFs as financial gift baskets. It's like putting all the different investments together in one convenient package, just like a bouquet of flowers. And I'm thrilled that you found my breakdown of Bitcoin ETFs insightful and the analysis of its price movement valuable. I very much appreciate the support and best of luck to you too.
Perfect explanation from you sir. ETF is a good way for Investors who can't operate crypto exchange to have access to crypto which by so doing the crypto market will become stabilize. Success to you.
Thank you for the kind words. You're absolutely right. ETFs are a great option for investors who don't want to deal with crypto exchanges directly. It allows them to have access to the crypto market and helps stabilize it. I appreciate the support. Wishing you all the success as well.
Well my dear friend your post is so much information and you wrote so well and so and and deep analysis I must say you spend a lot of time to share your analysis and your article is always informative for me specially because when I go through any topic I must read your post on because it increase my knowledge as well as you wrote so simple language that it become easily.
So you are right and just after approval the fall was there are a lot of reasons but I must say due to we don't have adequate experience we don't have proper Rolls and regulation at the time and but the most important thing is that Bitcoin ETF is a centralised system which is mainly governance by the government and this is the main thing that we are not in loss we are very less likely chance of getting risk that's the main reason which attract so many institutional investors to do funding and take part in trading.
And you have very nicely elaborate the last question I think this was one of the difficult question to answer I took very deep time to answer this question but when I read your answer you have just use the keyword and through the point that the main reason of your post at your article is always informative for us best of luck
Thank you for your kind words, my friend. I'm glad you found my post informative. Yeah, after the approval, there was a fall in the market. It happened because we didn't have enough experience and proper rules and regulations in place at that time. But the cool thing is that Bitcoin ETF is a centralized system, mostly governed by the government. This means there's less risk and attracts institutional investors. Oh, and thanks for appreciating my answer to the last question. I took my time, but your feedback means a lot. Good luck to you too.
You are welcome and you are really inspiration and motivation for me to keep doing good work
How are you friend and very comprehensive explanation of each question and I think boys have more knowledge in Bitcoin and trading the must doing trading on the Bitcoin that's the reason they are writing so good and with proper knowledge and properly search and wishing you success
Greetings, my friend. I'm doing great, thank you for asking. I'm glad you found my explanation comprehensive. It's not just boys who have knowledge in Bitcoin and trading, people of all genders can be knowledgeable about it. It's all about interest, research, and learning. Anyone can write well and have proper knowledge with the right effort. Thank you for your kind wishes, I appreciate it! Wishing you success too.
Thank you dear for positive response
Greetings, my friend @sahmie! Your analogy of ETFs as financial gift baskets is brilliant—making complex concepts simpler. The comparison to a bouquet of flowers adds a delightful touch. All the best in the contest, success for you! 👍
Greetings friend.
Thank you so much for your kind words and compliments. I'm glad you liked my analogy of ETFs as financial gift baskets. I always try to make the lessons simpler and more understandable. And I'm happy that the comparison to a bouquet of flowers added a delightful touch for you. I really appreciate your support and well wishes. All the best to you too. Good luck in the contest.
You have explained each and every question in your best words and what is the effect of Bitcoin ETF at overall market and what are the benefits that we can take from it and after its approval by SEC what was actually trend that we all have seen so I agree with everything whatever you have written and explain in your post I wish you good luck in this engagement challenge.
Thank you so much for your kind words and agreement with my post. The approval of the Bitcoin ETF by the SEC had a big impact on the overall market. It brought more legitimacy and accessibility to Bitcoin trading. As for the benefits, it provided investors with a regulated and convenient way to invest in Bitcoin without actually owning it. The trend we saw after its approval was increased interest and trading volume in the crypto market. I really appreciate your support and well wishes for the engagement challenge. Thank you and good luck to you too.
It was my happiness and source of my joy to visit your post and respond on it and I am happy that you have respond me in such an reasonable and extensive comment I really appreciate it and I again wish you a lot of blessings in your life and in this engagement challenge also
Bien estimado amigo, nuevamente dejas tu conocimiento adherido en las respuestas de cada pauta del desafío. El ejemplo de la canasta es un gran ejemplo para hacer entender el significado de una acción o participación.
Esta parte donde expresas que "compre el rumor, venda la noticia" es claramente lo que sucedió con la caída del BTC tras la aprobación de los ETFs. Fue un retiro masivo con el propósito de obtener las ganancias después de haber vendido la noticia. De todo hay en la viña del Señor.
Esperemos ahora como se desenvuelve el mercado que lo veo cautelosos, con un halving a la vuelta de la esquina, la revalorización del dólar, las tasas de interés de la FED y la cotización de la ETF. Son muchos factores que influyen en estas aguas turbulentas del mercado de critpomonedas.
Saludos y éxitos. ¡Bendiciones para ti!
Greetings friend, thank you for your kind words and for clarifying. You're absolutely right about the "buy the rumor, sell the news" situation with BTC and the ETF approval. It was indeed a massive withdrawal to make profits after selling the news. The cryptocurrency market can be quite unpredictable with factors like the upcoming halving, the revaluation of the dollar, the FED's interest rates, and the ETF price. But then, let's stay hopeful and see how the market develops. Sending you warm greetings and wishing you all the success and blessings too.
Saludos, ¡Buena suerte!
I am happy that the statement which you give regarding the security and ownership in between both of these like having ownership of Bitcoin as well as having a bitcoins exchange trading funds shares and you have not only talk good in this statement with also and every question in best I wish you success
Thanks a lot for your kind words. 'm really glad that you found my statement about security and ownership in Bitcoin helpful. I tried my best to cover all the important aspects and answer your questions. I appreciate your support and wish you all the success as well.