To the untrained eye, some of the financial products making waves on today’s market might seem at first glance like just a mashup of two trends that can entice investors with mouth-watering combinations. For example, you could say that such is the case with cryptocurrency-based exchange traded funds or ETFs – but in this case, there is a method to the madness, and a reason why there’s so much excitement over the SEC doing its homework on Bitcoin ETF applications.
Today, investors are continuing to speculate on news just before the holiday that the U.S. Securities and Exchange Commission has set a deadline for Bitcoin ETF review, planning to finish this task before Nov. 5.
With ETFs exploding in so many different sectors, from coffee to real estate, you can tell that these kinds of financial products garner a lot of attention. So do cryptocurrencies, as investors move toward Bitcoin and Ethereum and other options, betting on the rise of versatile digital currency to replace old “state hard money.”
So what’s the big deal with cryptocurrency ETFs? Actually, it makes abundant sense to offer these options to investors and traders as cryptocurrency markets grow.
For those who don’t want to shell out for the value of an entire Bitcoin at around $6500, an ETF offers an attractive way to dip a toe into the water of cryptocurrency trading. It also creates more specific kinds of liquidity in the market. Buyers can sell during a market day, instead of doing the kinds of trades that can’t be easily reversed.
Many of the benefits of crypto ETFs have to do with that immediate liquidity and the “ease of use” of trading them. J.P. Morgan touts easier access and high integrity as values behind using ETFs in the cryptocurrency sector.
“Cryptocurrency enthusiasts hope that once banks understand the incredible opportunities that Bitcoin offers, they will stop banning the use of their credit cards for cryptocurrency purchases and will abandon other similarly unfair practices,” wrote Julio Gil-Pulgar in February. “If banks can be persuaded to cease their hostilities toward cryptocurrencies, this would help in obtaining the SEC’s approval for Bitcoin ETFs. If the SEC allows any Bitcoin ETFs, many financial experts believe that interest from retail and institutional investors and their billions of dollars could propel Bitcoin’s value to amazing highs.”
Any Bitcoin fans hoping for an immediate jump in value are disappointed as this major indicator stays around its one-month median at just over $6,600. However, the stability of BTC USD over a five day or month long span is attracting some investors, and others are taking the long view with a “buy and hold” approach – despite any deviations in short-term cryptocurrency prices, these hard-line portfolio managers believe in “crypto 2.0” and a future that involves a lot more Bitcoin and related coin finance.
Look for ETF options to innovate in the cryptocurrency market in the future.