Hello, World! This is Major Tom to Ground Control .. Your bitcoin has left the earth’s exosphere and is now entering lunar orbit. The moon’s low gravity is refreshing and we’ve activated our rockets for a safe landing!
The Bitcoin world has had a stunning #uptober so far.
October 19, 2021, in particular, is a monumental day in the history of cryptocurrency. Just 13 days short of Bitcoin’s 13th birthday, the first Bitcoin ETF begins trading on the New York Stock Exchange (NYSE).
“1993 is remembered for the first equity ETF, 2002 for the first bond ETF, and 2004 for the first gold ETF. 2021 will be remembered for the first cryptocurrency-linked ETF,” noted Michael Sapir, the CEO of ProShares, during the launch.
Why is this historic for the crypto industry? We’ll get to that in a bit.
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But first, the details…
Eight years after the first bitcoin ETF application was filed, the SEC has finally approved the first bitcoin-linked ETF to make its debut on the NYSE.
ProShares, the 8th largest specialized ETF provider in the U.S., has launched the much-anticipated ETF which will track the bitcoin futures market. Check the BTC to INR rate to see how much Bitcoin is trading at today.
What does this actually mean?
An Exchange Traded Fund (ETF) is similar to a regular stock but tracks the performance of an index. For example, the S&P 500 ETF tracks the S&P 500 Index, the weighted market cap of top 500 publicly traded companies in the U.S.
And a futures contract is an agreement to buy or sell an asset, here bitcoin, at a future date at an agreed price. A Futures-based Bitcoin ETF, therefore, is similar to a stock, tracks contracts that speculate the future price of bitcoin and not the current price of bitcoin like in crypto exchanges.
Not without pitfalls…
To make things clearer, the ETF allows investors to bet on bitcoin’s price fluctuations rather than the underlying crypto itself. As Tyrone Ross, the CEO of Onramp Invest puts it, “the main thing to understand is you’re not buying actual bitcoin.”
However, Ross and other crypto pundits agree that the move is good for the overall crypto market.
Now, why is this historic?
The crypto industry for over a decade has longed for Bitcoin-related ETFs. Remarkably, the acceptance has been a major milestone in the turbulent journey of crypto’s nascent industry. And the reasons are many.
For people who do not desire to know the difference between a hot wallet and a cold wallet, who do not want to go through the hassles of another learning curve or deal with another cryptocurrency account, trading bitcoin-based ETF on the stock exchange is an easy way out.
A Major Regulatory Feat
Regulators globally for long have been at odds with the crypto industry and thereby impeding its growth prospects.
“This will be probably the biggest endorsement from the SEC for crypto,” noted Ian Balina, the CEO of Token Metrics. The futures-based bitcoin ETF provides a regulated alternative to investors who are wary of unregulated exchanges.
Massive Investments Coming In
And the result from the above two causations? The opening of floodgates for new capital and new people to enter the space. ‘An ETF is going to drive more institutional money in while helping with the liquidity of the market,’ noted Ross.
The ProShares Bitcoin Strategy ETF concluded as the second-most heavily traded fund on its debut day by jumping nearly 4.8% with over $1 billion worth of shares exchanging hands. A cue to regulators around the globe.
This is just the start…
The SEC’s accommodative stance towards crypto is a stepping stone for more nuanced regulations in the space globally. “This is an exciting step but not the last,” says Douglas Yones, the NYSE’s Head of ETF. There are at least 4 more bitcoin ETFs lined up for review in October.
Meanwhile, the SEC green lighting the first ETF has pushed the prices of bitcoin to an all-time high. Rest assured, it is safe to declare this moment as history in the making.
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Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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