The price of Bitcoin and other cryptocurrencies is skyrocketing. Many experts believe that the reason for this can be attributed to the expectations of the imminent approval of ETFs for the main cryptocurrency in the United States.
Recall that an exchange-traded fund or ETF is an investment product that allows investors to buy shares, the dynamics of the value of which depends on a certain underlying asset or set of assets.
The very fact of the existence of an ETF on Bitcoin could significantly increase the reputation of the cryptocurrency and the entire industry as a whole, since in this case, participants in ordinary stock exchanges will also be able to communicate with digital assets. And although the US Securities and Exchange Commission (SEC) has been rejecting applications for the creation of Bitcoin ETFs for several years in a row, now the situation may change.
We checked the latest data: today, Bitcoin is trading above the $ 54 thousand line. The most interesting thing is that it was BTC that showed the best growth result among cryptocurrencies in the top ten by market capitalization. This usually indicates the beginning of a new bullrun stage. Still, Bitcoin is the first to grow, then large cryptocurrencies, and then – projects with small capitalization.
Over the past seven days, BTC has gained 23.5 percent in value.
Why Bitcoin is growing
At the moment, at least 13 large companies have submitted applications to the SEC for the creation of a cryptocurrency exchange-traded fund and are still awaiting an official response from the financial regulator. Many believe that at least one of the applications will be approved by October 18th. However, with one catch .
As noted by Decrypt journalists , Commission representatives can approve an ETF that is based on the price of Bitcoin futures , and not the cryptocurrency itself in the regular market, that is, the so-called spot ETF. This means that the price of an asset may not coincide with what is happening in the niche, since users of the futures market seem to be placing bets on what is happening with the cryptocurrency rate in the future.
Here’s what Bloomberg ETF expert Eric Balchunas said on the matter.
A futures ETF filed under the Investment Company Act of 40, which is so popular with Generation Z, is under active consideration and is likely to be approved on schedule. We think there is a 75% chance of getting it approved as early as October.
In this case, participants in stock exchanges will be able to purchase securities for cryptocurrency. That is, it will not be the coin itself, but only a contract. However, there are two advantages here. Firstly, traders from another area would hardly be able to store coins correctly, so this approach suits them better. Secondly, the exchange will have to keep the equivalent of the cryptocurrency in its reserves, so the popularization of digital assets will certainly affect their rate due to the need for massive purchases of coins.
A futures ETF will allow investors to buy units, which are futures contracts, rather than the digital asset itself. Such an investment product has previously been criticized in the crypto community, as many believe that this is not what investors really want. A futures ETF will be less liquid and more expensive to issuers than a spot ETF. However, as a first step for the United States, this is not the worst step anyway.
Former banker and crypto trader Alex Kruger said on Twitter that such an investment product would actually be pretty bad. Here is his line.
If the ETF is accepted, it will be futures. This is not a rumor – some strongly believe in its acceptance. Ironically, this would be a terrible product: The SEC remains concerned about market manipulation and the lack of agreements with exchanges to keep them transparent.
Amid speculation about the positive reaction of the SEC to ETFs, the value of Bitcoin has already touched the $ 55,000 line. At the same time, the level of 50 thousand dollars can become a good line of support for the continuation of the bull run, according to Bloomberg analyst Mike McGlone. Here is his quote on this subject, in which the expert shares his vision of what is happening. The replica is given by Cointelegraph .
The break of the 50 thousand dollar line, which has been resistance since May , made it support for the fourth quarter of this year. The $ 40K level is similar to the $ 10K crypto launch site at the end of 2020, but now it is almost four times higher. The average price for 2021 is $ 44,500, while the demand for Bitcoin is growing and the supply is decreasing.
There is not much left to the key line of 100 thousand dollars – Bitcoin needs to rise in price less than twice to reach it. In the past, cryptocurrency has shown impressive growth in a matter of months, so the end of this year may not be an exception.
We believe that the current situation in the coin niche really looks positive. Apparently, the market is gradually preparing for the transition to the final stage of bull run. And if it is the same as at the end of 2017, it can be assumed that the end of 2021 will be no less bright. In any case, we recommend not to forget about risk management and traditionally invest only what you can afford to lose.