What might a Bitcoin ETF mean for the price?
Yesterday it was announced that an ETF may finally have the right stuff in the eyes of the SEC.
More about that can be seen here:
https://steemit.com/bitcoin/@jrcornel/new-bitcoin-etf-application-may-actually-gain-approval
Basically, this is due to the fact that this new ETP (similar to an ETF) would have a price point of $200k, be fully insured, keep holdings in cold storage, and get pricing from OTC regulated transactions.
All things the SEC had concerns about previously.
Which means, there is a good chance that this ETP gains approval and if it doesn't, approval by one is likely very near as they settle more and more of the SEC's concerns.
That being said, what might that do to the price of bitcoin?
In short, it would be really really really good!
Up to now, most of the proposed ETFs/ETPs have been for futures backed products which are cash settled as opposed to bitcoin settled.
This most recent one would be bitcoin settled, meaning that every share in the fund would represent a physical ownership in the underlying cryptocurrency.
That is a very important difference in determining what kind of effect it might have on the spot markets.
For an example of what may happen when ETFs eventually get approved, lets take a look at the gold markets.
Something that bitcoin is often referred to as; digital gold.
Back in 2003 gold ETFs were introduced for the first time. Many of which were physcially backed by the precious metal.
At the time gold was trading for roughly $300 an ounce.
Fast forward a few years and gold hit $1,900 an ounce in 2011.
That is over a 6X increase in just 8 years.
Keep in mind that all of that price appreciation wasn't due to ETFs as there was the whole "Great Recesion" in 2008 that spurred demand significantly as well.
That being said, prices still more than doubled to about $700 from 2003 to 2007, and reached $1000 an ounce just before the Recession and QE really sent prices of commodities skyward post 2009.
Here is a chart of ETF based demand for gold during that time:
(Source: https://steemit.com/bitcoin/@jrcornel/new-bitcoin-etf-application-may-actually-gain-approval)
There certainly seems to be a correlation between the ETF demand and the price of gold. As the ETF gold demand increased, so did the price.
Which helps show just how much of an impact ETFs had on the markets.
I would expect the exact same thing to happen to bitcoin.
When an ETF/ETP finally gets approved, that is bitcoin settled (as opposed to cash settled), there will be a profound impact on the price of bitcoin.
Primarily for several reasons, in my opinion:
For one, these funds will have to take up an inventory in order to launch the fund. That in itself will require a significant amount of buying for bitcoin right out of the gate.
Secondly, these types of funds will open up bitcoin to tons more investors. Investors that didn't want to risk opening an account on an unregulated exchange in order to buy bitcoin will now be able to buy it right from their Etrade account or TD account.
Finally, and this one kind of piggy backs off of my second point, it will get rid of the custody concern that many people have regarding bitcoin. They won't have to worry about getting their bitcoin stolen or hacked as they will own traditional shares in a traditional brokerage which has (traditionally) been very secure.
All of that will likely equal much higher prices for bitcoin.
Stay informed my friends.
Follow me: @jrcornel
I am not familiar with that ETF issue but I sure want BTC price to surge because of the potential investment for it by large entities so that it can finally serve me with my goal in life.
Yes, I think that is the hope of many invested.
You are really so beautiful@cryptopie sir.
The thing to figure out is, how much of gold's rise was due to ETFs and how much was due to QE/inflation?
To the Moon Bitcoin! 🌝🌝🌝
It's tried the other direction long enough, time to try something different.
Good post @jrcornel! To make it short, we should buy more and more Bitcoin now before the price goes up very high so we can enjoy more wine, party and happy time with family and friends! Bitcoin is real! =)
Haha yes. Well said.
Bitcoin is LIFE
It's good that you pointed out that the ETF demand for Gold was because of demand for gold in the early 2000's. At that time commodities were booming due to low interest rates and a weakening dollar...inversely raising the value of gold.
You are correct that 2008 and the money printing by the Fed increased the value and demand for Gold.
Which leads you to a good conclusion that if investors have high demand for a traditional finance vehicle to invest directly in Bitcoin, that the price will also rise. It's great that they are also bitcoin settled so people will get a ownership stake in Bitcoin, like you say. This might be a great catalyst for getting big, institutional money into crypto! Crypto up to this point has been mainly retail investors and hedge funds with a large risk appetite.
Keep this articles coming @jcornel !
Yes good point. The first fomo rally was lead by retail, the next one will be lead by institutions. :)
Thanks for this outstanding post i understand etf clearly.thanks for sharing with us this information brother.
To listen to the audio version of this article click on the play image.
Brought to you by @tts. If you find it useful please consider upvoting this reply.
More traditional investors are always good. It should also be good for passing on crypto when someone passes away. It will definitely make crypto more available to those who can not understand how to use bitcoin.
You have some good points here i never tough about bitcoin in this way
Physically backed bitcoin ETFs likely would take prices to the moon, in my opinion.
I agree with your point of view. I think the impact that Bitcoin ETFs will have on the market will be very different compared to the one we had with futures a few months ago.
Bitcoin futures are merely speculation and there is no direct connection with the underlying asset. For ETFs, especially the physically backed ones, will be different. Usually, in traditional markets, they are not seen as speculation, but as a form of investment. The presence of ETFs on the market will help a lot to spread the word of bitcoin to the masses, in my opinion. And hopefully, they will push the price up again.
Yes, I think this next wave will be driven primarily by institutions, but I am sure there will be a large amount of retail sprinkled in there as well. After all, they won't want to miss the train twice.