Bitcoin exchange traded funds; Who are the winners and losers of the SEC license?

The US Securities and Exchange Commission has long approved the licensing of Bitcoin exchange traded funds (ETFs), but these funds are futures ETFs and, contrary to popular belief, are not directly supported by Bitcoin. Now the main question is what effect do these funds have on the price of bitcoin?

to the Report Finally, after the digital currency industry insisted on its request for more than eight years, the US Securities and Exchange Commission approved the licensing of Bitcoin ETFs. It seems that with the introduction of Bitcoin ETFs, ordinary people will be able to invest indirectly in this digital currency through major stock markets, and it is possible that new investments will enter the Bitcoin market and the price of this digital currency will increase rapidly. Increase more. But is that really the case?

This has its winners and losers, which we’ll talk about later. First, let’s look at what really happened. The US Securities and Exchange Commission has approved the offering of bitcoin ETFs, but contrary to most people’s expectations, this has nothing to do with the price of bitcoin. The US Securities and Exchange Commission has, in fact, authorized the offering of tradable funds on the Bitcoin futures exchange. This means that the new fund, offered by a company called ProShares, does not sell you Bitcoin-backed stocks, but instead concludes contracts with you that allow you to buy bitcoins in the specified future.

It sounds complicated, and it really is. When you buy a regular ETF, its stock value is calculated entirely on the basis of the underlying asset price. This basic asset can be bitcoin, gold, oil or a portfolio of shares of several different companies such as S&P. On the other hand, when buying a futures ETF, other factors cause the stock value to differ from the underlying asset price. As Matthew Hougan, CEO of Bitwise Investment, explains, futures market traders who are well aware of these products take into account factors such as price differences between futures and instant markets, as prices rise as they approach. Upon maturity and slippage, they predict sudden price jumps.

You probably already know what is happening. The winners of Bitcoin futures ETFs are professional traders and their wealthy clients. These people are familiar with concepts such as contango, or the price difference between futures contracts and the immediate market, and can make money from it. In fact, it seems that the shares of the new ETF of Proshers Company will be traded with a difference from the real price of Bitcoin, and this is due to the activity of investors who want to take advantage of future movements in the price of Bitcoin.

The company itself is one of the definite winners of this game and the reason is clear. Providers is the first company to enter the ETF field of digital currencies, although the US Securities and Exchange Commission is expected to approve the products of its competitors this week. Matthew Hogan, who previously ran a stock exchange trading company, says being a leader is crucial, as liquidity usually flows to the first company to make a move. So congratulations to the company, because it seems to have done better in legal battles than its competitors.

Alex Kruger, a well-known economist, wrote on Twitter:

It seams [برخی از] Experts have never heard of cantango, something that could drive stock prices down 10 percent. In fact, Bitcoin Grayscale Mutual Fund is better than all future ETFs. Let us be thankful that the market has not yet paid attention to this issue.

Also read: All about Bitcoin ETF in plain language

But the losers are micro-investors who hoped the ETFs would be like a Vanguard-traded fund and could buy bitcoin like a common stock. But what they have gained instead is a strange investment that they may not be able to comprehend and that will cost them more. Gary Gensler, chairman of the US Securities and Exchange Commission, thinks the law covering future ETFs and mutual funds better protects micro-investors. It should be noted that US micro-investors who want to buy bitcoin can still buy it directly from Quinn Base, Robinhood, Kraken or other reputable brokerages, although they may be familiar with the technology. , Give up their work.

Other losers in the game are companies like Gary Skill and Gemini. The two are one of the oldest companies trading in Bitcoin and have been asking the US Securities and Exchange Commission for years to approve their requests for Bitcoin ETFs. Now, after years, Gencler has come to the conclusion that future ETFs are a good thing. This is not at all pleasant for CryingSkill because it has made their main product, their Bitcoin Mutual Fund shares traded on the OTC market, seem extremely expensive and useless. The company has long wanted to turn its product into a standard ETF, but now it can only try and wait for the result.

In general, it can be said that all those who are present in the digital currency industry are the winners of the recent decision of the Stock Exchange Commission. The price of Bitcoin is now nearing its historic high, and the Exchange Commission has confirmed what digital currency advocates have long known; That Bitcoin is real. The organization showed that bitcoin is a great asset and deserves to be recognized by both financial institutions and regulators. The Exchange Commission seems to be approving the major bitcoin ETFs sooner or later, and it will take some time after that to see the ETFs of Atrium, Solana and other digital currencies.

Hogan says the path to bitcoin ETFs is likely to be similar to the first gold ETFs. When the first gold ETF was introduced in 2004, it had little effect on its price. In the next decade, however, it helped push the precious metal to unimaginable prices.

Hogan says:

The market has overestimated the short-term impact of ETFs and underestimated their long-term impact.