Tech

Bitcoin ETF breaks records on Wall Street

The move of cryptocurrency to the mainstream was a major milestone this week when the first exchange-traded fund associated with Bitcoin emerged. debuted on the stock market… In simple terms, this means that anyone with a brokerage account will soon be able to buy and sell a financial product backed by Bitcoin on the stock market. This comes after years when US financial regulators dodging cryptocurrencywhich is known to be unstable. But now it looks like the government is ready to try new things.

Debut was a big hit… After executives at ProShares, the Maryland-based company behind the ETF, rang the bell on the New York Stock Exchange on Tuesday morning, the product surpassed $ 1 billion in trading on its first day. It does it one of the best ETF debuts in history… Later that day, the price of bitcoin skyrocketed its unprecedentedly high from $ 64,895 to new record at $ 66,975… The experts are not particularly surprised.

“It was a blockbuster, a high-profile, home-based debut,” Eric Balchunas, senior ETF analyst at Bloomberg, told me. “It brings a lot of legitimacy and brings a lot of attention to the crypto space.”

But before we figure out why this is, you will probably have a few more questions about the terminology being thrown around here. For example, what is a bitcoin exchange-traded fund? What does “futures” mean? And do most people really need to pay attention to cryptocurrency after so many years when they were probably not paying attention to cryptocurrency? Let’s look at these questions one by one.

Exchange traded fund or ETF is basket of securities tied to the price of assets such as stocks, bonds, or commodities that can be bought or sold on stock exchanges; anyone with a brokerage account can trade ETFs. Bitcoin-related ETFs are naturally pegged to bitcoin price, and under Investment Companies Act 1940All new ETFs must register with the Securities and Exchange Commission. This detail is important because the agency’s approval for the Bitcoin ETF suggests that it is open to trading a large number of cryptocurrency-pegged products. Although the SEC does not consider cryptocurrencies to be securities in past, recent events indicate that his views on this issue are changing.

But it looks like it will be some time before the SEC makes a decision on whether it will allow Bitcoin trading on the stock market. The new ProShares fund, called the Bitcoin Strategy ETF, is based on futures. This means that the fund keeps track of bitcoin futures contracts traded on the highly regulated Chicago Mercantile Exchange. In other words, the ProShares Bitcoin Strategy ETF does not contain Bitcoin itself, but rather places a bet on the future price of Bitcoin. V performance on CNBC on tuesdaySEC Chairman Gary Gensler noted that the new product will be overseen by the Commodity Futures Trading Commission, a subsidiary of the SEC that will provide some investor protection, but it’s “still a very speculative asset class.”

Despite these tricky details, this new Bitcoin ETF is a big deal. The cryptocurrency community has been striving for a similar financial product for years, but regulators were hesitant to approve it. Cameron and Tyler Winklevoss submitted the first-ever Bitcoin ETF in 2013, but the SEC rejected their first application four years later – and again in 2018 – citing the volatility of the cryptocurrency market… Since then, the mall postponed decisions on various bitcoin ETFs, but it is currently reviewing several new proposals that are subject to a 75-day review period after companies submit them. If the SEC does nothing, which happened in the case of ProShares, funds can start trading… In the next couple of weeks, the SEC will be considering review periods for proposals from other companies based on cryptocurrency, including Valkyrie Investments, Invesco and VanEck, will end too.

“It’s not that this particular ETF will bring in hundreds of billions of dollars or something like that,” Balchunas explained. But this is an important point, because “it is a bridge to this whole other world, which is probably not related to cryptocurrency and can start using it now that it is delivered in the format that they like.”

In other words, more crypto ETFs are on the way. And if Gensler sees these new financial products sold without incident, his SEC could open the door to even more, including those that do contain cryptocurrencies like Bitcoin and Ethereum. The very existence of these ETFs not only means that investing in cryptocurrency has become easier. This also means that bitcoin has more to do with gold than ever before.

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