ETF Listed – What’s Next for Bitcoin?

After Bitcoin (BTC) fell below $ 30,000 in June, Bitcoin (BTC) saw a nearly four-month rally, rising more than 100%. On October 15, it returned to the $ 60,000 level after ending the day up 7.56%. The next rally was attributed to the excitement surrounding the SEC, which gave the ProShares Bitcoin Futures ETF the green light. Bitcoin has since successfully defended its current price level and is approaching its all-time high of $ 64,899.

The listing of the ProShares Bitcoin Strategy ETF on October 19 is set to give Bitcoin and crypto an extra boost to become mainstream. However, a key fact of the new Bitcoin ETF is that it does not invest directly in Bitcoin, but instead puts some of its assets in BTC futures contracts.

“BITO”

Listed as “BITO” on the New York Stock Exchange, the ProShares Bitcoin Strategy ETF is the first of its kind, which some say it has been 10 years since several Bitcoin ETFs were mostly held or completely blocked by US securities regulators.

Some well-known applications that are still pending are the Bitcoin ETFs from WisdomTree and VanEck. ProShares got the green light due to a specific difference: The ProShares Bitcoin ETF is a futures-based ETF and is also filed under the rules for mutual funds.

The SEC likes this structure because it lacks jurisdiction over crypto exchanges that are not registered as exchanges in the United States.

Fund structure

As stated in the ETF prospectus filed with the SEC, the fund will invest 25-30% of its assets in bitcoin futures contracts. It also stated that it intends to invest in the securities of ETFs organized and listed for trading in Canada, as well as other pooled investment vehicles.

These positions are designed to manage inflows and outflows in response to unusual market conditions, increased margin requirements, or when it becomes impractical for the Fund to access futures contracts. Most of the fund’s assets go into money market instruments, which are then broken down into US Treasury bills, repurchase agreements and reverse redemption agreements.

Promote mainstream adoption

As mentioned earlier, Bitcoin ETFs are making the entire market accessible, much like Coinbase’s listing on an exchange earlier this year. This is because investors may not have direct access to cryptocurrencies, but having a brokerage account gives them the opportunity to get exposure to bitcoin.

Michael Sapir, CEO of ProShares, said in a statement that BITO offers exposure to investors who want to buy stocks and ETFs but don’t necessarily want to buy Bitcoin from an exchange or set up a wallet complex.

BITO can also be a precursor to other investment products. For one, the largest asset manager for digital currencies, Grayscale Investments, plans to convert its flagship GBTC into an ETF “as soon as there is a clear, official instruction from the SEC,” said the director. Grayscale Media, endorsed by Jennifer Rosenthal. Also Grayscale CEO Michael Sonnenshein speak that after the successful listing of BITO, an ether-based ETF is expected to follow.

Apart from that, another ETF based on Bitcoin futures is also starting this week. The SEC filings show that it has accepted a registration application to list Valkyrie’s Bitcoin Strategy ETF shares on the Nasdaq. Melanion Capital, a France-based investment firm, will also launch its own Bitcoin-linked ETF on October 22, after receiving approval from the French financial regulator AMF. The fund, called Melanion BTC Equities Universe UCITS ETF, invests in a diversified basket of stocks linked to the daily price movements of Bitcoin and is listed on Euronext Paris.

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Increase in open interest

Bitcoin’s active trading activity also fueled open interest in BTC futures contracts. Data from the Bybit cryptocurrency exchange shows that open interest for BTC futures contracts hit $ 23.1 billion on October 18.

By far the leading exchange with the highest dollar contract value is Binance with 5.3 billion US dollars. The Chicago Mercantile Exchange Group (CME) ranked third at $ 3.5 billion, although open interest in futures contracts recently hit an eight-month high. Open interest refers to the amount of futures contracts that are not settled. It is often used to determine the strength of a trend or market sentiment.

Bitcoin’s resurgence has made many investors confident that BTC’s price could continue to rise – even though many believe the newly listed Bitcoin ETF has been valued in the past few weeks. As a result, the bullish narrative is making a comeback, repeating what investors wagered earlier in the year.

Futures with a settlement date in December start the year at prices up to $ 74,000. This has subsided as the market cools, but is again in line with rising spot prices.

Betting on a Bitcoin price of $ 100,000 is so trending that centralized financial institutions like Standard Chartered have set similar price targets for this year or early 2022.

The growth in wallet addresses is a measure of whether or not higher prices are likely to remain in the future. Adoption plays a prominent role in this, and while Brazil is not yet ready to join El Salvador to establish Bitcoin as legal tender, such moves are likely to increase the number of new wallets.

The data shows that the number of wallet addresses has grown steadily since October 2020. There are currently around 77 million addresses. In addition, there is also data showing that “hodlers” or addresses that have held BTC stocks for at least a year are also increasing in number.

Since new investment products linked to Bitcoin could also get the green light in the near future, more institutions could get involved. With BITO alone, a whole new class of investors will open up, including heavyweights in the form of (401,000) retirement funds and retirement accounts. But regardless of whether bitcoin hits $ 100,000 or not, the new bitcoin ETF at least shows that bitcoin is a respectable investment.

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