Bitcoin ETF detailed explanation and market analysis
The article the day before yesterday briefly mentioned the impact of the listing of Bitcoin ETF on Bitcoin. As a result, many friends in the background privately messaged Xinhuo and wanted to ask Xinhuo to publish a detailed explanation about ETF, so today I will give you a detailed explanation of ETF.
1. What is a Bitcoin ETF? Why is everyone looking forward to the arrival of Bitcoin ETF?
ETF, short for Exchange Traded Fund, is an open-end fund that is traded on an exchange and has a variable fund share. Different from ordinary fund products, the price of ETF funds needs to track the price of a specific index or asset, and is strictly anchored to the price of the index/asset. The Bitcoin ETF, as the name suggests, is a fund anchored to the price of Bitcoin. Buying/selling Bitcoin ETF means that you can get the same income as investing in Bitcoin without actually buying or selling Bitcoin. ETF fund managers will buy anchored real assets, which also means that once the ETF is approved, there will be a huge new demand for Bitcoin in the market.
Compared with the traditional investment method of buying coins, Bitcoin ETF has the following advantages:
(1) It is convenient and fast to purchase. For many novice bitcoin investors, the first difficulty they encounter is not knowing how to buy coins. Many people give up when they hear that they need to download a special exchange app and learn how to use it to buy coins. However, investing in Bitcoin ETF does not have these problems. As long as you have stock trading software and an account, you can trade Bitcoin as easily as buying and selling stocks. The income is almost the same as buying coins directly, so the transaction threshold is greatly reduced.
(2) Funds are safe and secure. In addition to the inconvenience of trading, the second obstacle for new bitcoin investors to buy bitcoin is worrying about the safety of funds. This is understandable, after all, since the birth of the cryptocurrency exchange, it has been accompanied by various security incidents. In the past few years, there have been endless incidents of investors losing their money due to accidents such as exchange closures, bosses running away, bizarre deaths, and inexplicable loss of contact. It is obviously unsafe to put coins on exchanges; but it is necessary to remove coins from exchanges For your own cold wallet, the learning curve is too steep. Therefore, many investors eventually gave up buying Bitcoin because of security concerns. Bitcoin ETF can just solve these problems. Since ETF funds are subject to strict supervision by securities regulatory agencies, all underlying assets and funds must be placed in trustworthy third parties for custody, and the risk of assets being zeroed due to fund runaways can be reduced. to the minimum.
(3) Conducive to tax avoidance. Many countries in Europe and the United States impose higher capital gains taxes on cryptocurrency transactions. For reasons of tax avoidance, European and American investors generally prefer to conduct transactions through specific pension accounts (such as 401k accounts in the United States, TFSA accounts in Canada, etc.), because income tax can be exempted or paid less. However, pension accounts have relatively strict restrictions on investment targets, and cryptocurrencies such as Bitcoin are not within the investable scope of pension accounts. Since ETF products (including Bitcoin ETF) are investable objects for pension accounts, the ETF of Bitcoin is very attractive to investors in some European and American countries who prefer trading tax avoidance.
(4) Regulatory friendly. Since Bitcoin ETF is a formal investment product issued after approval by the securities regulatory authority, there is no compliance problem for professional institutions to invest in Bitcoin ETF. In the past, because there were no related products, many institutional investors could not directly invest in Bitcoin even if they were optimistic about it. Bitcoin ETF is tantamount to establishing a legal and compliant channel for these institutional investors to invest in Bitcoin. This time, Dan Bin was able to buy a large amount of Bitcoin ETF fund shares, which should also benefit from the launch of Bitcoin ETF.
2. The Past and Present of Bitcoin ETFs
Just because Bitcoin ETF has the advantages of greatly lowering the transaction threshold and reducing transaction costs, when the cryptocurrency market has just begun to take shape, the industry has already taken the establishment of Bitcoin ETF as an important goal for future development, hoping to use this to transfer huge amounts of Mainstream funds are introduced into the cryptocurrency market. It's a pity that the sky doesn't follow people's wishes, and the development of Bitcoin ETF is not smooth.
As early as 2013, the Winklevoss brothers had the idea of setting up a Bitcoin ETF, and submitted a Bitcoin ETF application to the SEC, hoping to issue an open-end Bitcoin ETF fund that could be traded on the Nasdaq market. But the application was eventually rejected by the SEC. In the following 7 years, cryptocurrency practitioners, like Sisyphus, went on and on and failed repeatedly. They submitted more than ten ETF applications, all of which failed. The SEC’s approval conclusion is that Bitcoin, as an investment target, has excessive price fluctuations, lack of supervision, and is easy to be manipulated. It is not yet ripe to set up an ETF.
Although the application of the Bitcoin ETF project has not been smooth, the development of Bitcoin trading infrastructure has not stopped. In other similar ETF products, cryptocurrencies have actually made very considerable achievements in recent years.
In September 2013, Grayscale Fund’s Grayscale Bitcoin Investment Trust (GBTC) was established. After years of operation, Grayscale Fund has now developed into the world’s top cryptocurrency management institution, and its GBTC trust is the world’s largest Bitcoin investment trust. Trust products, the asset scale is as high as 3.88 billion US dollars. In November 2018, Europe's first cryptocurrency ETP fund (HODL ETP) was listed on SIX, the largest exchange in Switzerland. As of now, dozens of cryptocurrency ETP fund products have been approved in Europe, with an overall asset size of close to US$500 million. Whether it is Grayscale's GBTC or European ETP, they can provide investors with a trading experience and security close to Bitcoin ETF.
Through the smooth operation of Bitcoin ETF products in recent years, the feasibility of Bitcoin ETF has been fully verified. In addition, more and more mainstream financial institutions have gradually recognized the value of Bitcoin and are eager to invest in it through legal and compliant channels. In the market, the development of Bitcoin ETF has finally ushered in the moment when it breaks out of its cocoon and becomes a butterfly. On February 18 this year, the world's first Bitcoin ETF, Purpose Bitcoin ETF, was officially listed on the Toronto Stock Exchange in Canada. Its asset management scale (AUM) reached an astonishing $422 million within two days of its launch. Immediately afterwards, on February 19, the Toronto Exchange launched the second Bitcoin ETF product, Evolve ETF. It is expected that more Bitcoin ETF funds will be launched in the Canadian market in the future to meet the strong demand for such products in the market.
3. The future of Bitcoin ETF and its impact on currency prices
Regarding the future of Bitcoin ETF, the focus is naturally still on the attitude of the US SEC. With the sharp rise in the market value of Bitcoin, mainstream financial institutions have gradually abandoned some past prejudices against Bitcoin and turned to accept Bitcoin as a brand new asset class. Under the new situation, it seems a little out of date for the SEC to continue to maintain a strict attitude towards Bitcoin ETFs. The outside world has also turned from conservative to optimistic about the prospect of Bitcoin ETF approval by the SEC. In a TV interview conducted in January this year, Cathie Wood, the goddess of ARK stocks, predicted that the Bitcoin ETF is expected to be approved by the SEC when the market value of Bitcoin is close to 200 million US dollars. "The strong demand in the market must be met," she said. .
In addition to the rapidly expanding overall market value and strong market demand, Bitcoin ETF is also expected to usher in good news at the SEC head level. Gary Gensler, the candidate for the new SEC chairman nominated by the Biden administration, has a deep understanding of cryptocurrencies. As a finance professor at MIT, he once taught a public class called "Blockchain and Currency". A crypto-enlightened faction as the chairman of the SEC will undoubtedly further increase the chips for the approval of the Bitcoin ETF. The cryptocurrency management company VanEck, which failed twice before the Bitcoin ETF, submitted a Bitcoin ETF application for the third time in December last year. As the only Bitcoin ETF project currently under review by the SEC, once VanEck’s Bitcoin ETF application is approved , will become the first Bitcoin ETF fund listed and traded on a mainstream Wall Street exchange, thus officially knocking on the door of the US $6 trillion fund market.
Interestingly, as early as the beginning of 2018, someone published a post on Reddit/Bitcoin to predict the currency price after the launch of the Bitcoin ETF. At that time, the reference coordinate system was the gold ETF. In March 2003, the first gold ETF, GOLD ETF, was listed on the Australian Exchange. At that time, the price of gold was $10796/kg. In the following seven years, the price of gold rose by 454%, and finally reached a historical high of $59774/kg. Based on this, the poster calculated that if the Bitcoin ETF can also form a similar driving effect, Bitcoin is expected to stand at $62,000 in the future. It is a pity that the Bitcoin ETF was not approved in the end, and the blessing effect of the ETF can only be left in the imagination. This year, when the price of Bitcoin broke through 50,000 US dollars, the first Bitcoin ETF was finally ushered in the listing. Will the Bitcoin ETF be as magical as predicted in the future, boosting Bitcoin to rise by another 450%, reaching 250,000 US dollars? Or even $400,000 on top of the moon? Let time tell.
Finally, let me tell you about today's market
It was mentioned in yesterday’s article that there may be another round of trampling on Bitcoin, but today’s market price began to drop. At present, Xinhuo recommends that everyone be careful not to buy bottoms and not to take chances. Short positions are the safest. Funds in this market Safety is paramount.
