Category Archives: Bitcoin

Bitcoin, Crypto, Cryptocurrency

Crypto Markets: Bitcoin ETFs See Continued Approval Efforts

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Exchange-Traded Funds (ETFs) are investment securities that allow potential investors to trade a market without the risk of owning any stock. ETFs resemble index funds. They enable an investor to buy a collection of securities with a single transaction. ETFs trade any time of the day as their prices keep on fluctuating. Usually, ETFs track particular securities, just like an index.

What Are Bitcoin ETFs?

Every ETF is tied to an underlying index. In the case of Bitcoin ETF, the index would be the Bitcoin or a portfolio of Bitcoin and other cryptos. A Bitcoin ETF will follow the price movement of Bitcoin crypto.

SEC, the US Securities and Exchange Commission classifies ETFs as securities. An investor does not need to own the underlying asset. ETFs are good options in volatile trading markets because they are appropriate in mitigating risks. Trading Bitcoin and other cryptocurrencies have had challenges, especially high volatility and regulation.

Since its introduction about a decade ago, Bitcoin has grown in popularity, attracting interests from investors and governments.  As an investment option, Bitcoin experiences significant and sudden price movements, which has caused skepticism in some sections. The crypto market is still unregulated, which exposes it to manipulation and fraud.  Investing in the crypto is not easy for new entrants; at the minimum, one has to set up as an account with an exchange firm.

A Bitcoin ETF will possibility address all these challenges. It will offer investors an opportunity to profit from a secure, familiar, and regulated environment. An ETF will add some element of security as investors’ money will be tied to the price and not the digital coin.

Bitcoin ETF Approval Attempts

ETFs are in the securities class; as such, SEC has regulatory authority over them. Before 2019, SEC had rejected several applications for Bitcoin ETFs to operate at the New York Stock Exchange.

In October 2019, SEC rejected an application for a Bitcoin ETF from Bitwise Asset Management. In its rejection notes, the regulator cited a high probability of manipulation and fraud as the main reasons for the denial. SEC seems not to have a problem with the Bitcoin ETFs as a product; the concern is with the underlying asset.

In mid-November 2019, SEC announced it would be reviewing its October decision to reject Bitwise Asset Management’s ETF application. In its advertisement for review, the regulatory body stated that it would be opening the request for comments. It has given a one month period for evaluation. However, the rejection order it issued in October is still in force.

Bitwise Asset Management made its application at the beginning of this year. The request relied on extensive data research. Bitwise remains hopeful and is considering adopting the research route again in its re-submission.

This November, Kryptoin Investment Advisors, a firm based in Delaware, has filed an initial registration statement with SEC. The ETF has been in development for two years and will track the Bitcoin reference rate.  T A former executive director of the World Gold Council spearheads the Kryptoin’s EFT application. The former director believes that the challenges that Bitcoin is facing as a class asset as similar to what the world gold council experienced when it introduced SPDR Gold Shares to the market.

The market is waiting for the first approved Bitcoin EFT. There is optimism that EFTs will eliminate the issues with Bitcoin and the altcoins. SEC is not convinced that Bitcoin is free from manipulation, but with all the interest from different experts, it’s only a matter of time.

Bitcoin, Crypto, Cryptocurrency

Crypto Markets: SEC Denies Bitwise Bitcoin ETF

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Crypto Markets: SEC Denies Bitwise Bitcoin ETF

With the rising popularity of bitcoin as a global cryptocurrency widely accepted, many companies and services have emerged. They emerged with the aim of taking bitcoin to the next level as the currency of the future. One of such services is the bitcoin ETF. We shall discuss it in its entirety below.

What Are Exchange-Traded Funds (ETFs)?

Exchange-traded Funds (ETF) are investment funds trades very much like a stock. Essentially, they are investment vehicles that allow investors to purchase assets without actually owning them. Portions of ETFs are owned by shareholders but they do not own the underlying assets.

ETFs trade on exchanges like stocks, bonds, and commodities. Most of them work by tracking the performance of their assets and selling shares to investors in funds. An ETF is an attractive investment because it is cheap (requires low cost), tax-efficient and stock like in nature. It is simplified and has a wide range of assets. The prices of ETFs can be tracked through unique ticker symbols.

It is important to know that ETF is different from stock exchange and mutual funds. The main difference between ETF and stock exchange is; stock exchange is a representative of one company while ETF represents a basket of assets. Although it is similar to mutual funds, ETF has lower fees and trades on common stocks and stock exchange.

What is a Bitcoin ETF?

Bitcoin ETFs are simply an ETF whose underlying asset s bitcoins. It mirrors the price of bitcoins. Bitcoin ETFs give investors the opportunity to purchase bitcoins through the stock market without actually possessing them.

Bitcoin ETFs eliminate the risks of actually owning or investing in bitcoins and its complexities because investors are not directly involved in trading them.it acts as a shield to investors from the unregulated bitcoin cryptocurrency world by exposing them to bitcoin trading in a regulated setting.

Types of Bitcoin ETFs

Actual bitcoins holding ETFs like VanEck and Solid X Bitcoin are derivative ETFs. Essentially, this means they do not physically own bitcoins but trade on its future options. For these types of Bitcoin ETFs, examples would Direxion ETF and Proshares ETF.

How Do Bitcoin ETFs Work?

Bitcoin ETFs, as we have established, provides ways for investors to invest in bitcoins with minimal risks. They work in the following ways funds are collected from investors to purchase shares that are linked to bitcoins (shares are bought by spending investors funds) by the prospective custodians (might be a bank,  an assets management company or cryptocurrency exchange).

Assets are then distributed to ETF providers in exchange for fund shares (whose value is equivalent to the assets) by Authorized participants (parties in charge of buying ETF assets for EFT benefits). As a result of the above, without being owners of the underlying assets (bitcoin), investors become shareholders.

Bitcoins vs Bitcoins ETFs: Which Should Investors Choose?

Seeing how bitcoins ETF works you might get confused about which one to invest in. you might ask yourself ‘why not invest in bitcoins directly instead of going through the middleman process of ETFs. Well, there are several reasons to go fat bitcoin ETFs. They include;

Elimination of risks and burden: by investing in bitcoin ETFs, you can eliminate the risk and burden of trading in bitcoin itself. With bitcoin ETFs, you don’t have to manage a bitcoin wallet or lose your bitcoins should someone gets access to your private keys. This is due to the fact that you don’t actually own the bitcoins; you just have shares which you can sell in traditional stock exchange markets.

Ability to short-sell: when there is an anticipation or the possibility that the price of bitcoins will plummet in the future, investors can easily short-sell their shares of the ETFs. In the traditional cryptocurrency market, the possibility of this is nil.

Easy to understand: instead of getting caught up in the complicated process of trying to understand the bitcoin cryptocurrency, you can easily invest in a market you are familiar with.

Points of Advantage

Bitcoin ETF models have been proposed by its opponents to have some indispensable advantages:

  • Popularization of bitcoin and other cryptocurrencies and validation of bitcoins from global financial markets.
  • Provides investors with the opportunity of short-term, medium-term and long-term investments.
  • Its regularization would help in the legalization of bitcoin as an asset.
  • A means to restore bitcoin prices to what it was before it skyrocketed.
  • Reduces the risk of investing in bitcoins directly.

Bitcoin Controversies

Although the bitcoin ETFs look promising and future-oriented, it is still controversial and yet to gain approval from the US Securities and Exchange Commission (SEC) because of the controversies and disadvantages they portray.

Third-party players: no matter how trusted a bitcoin ETF custodian is, since bitcoins are controlled by them, investors would have no say in deciding the future governance of bitcoins.

Risks of fraud and manipulations: this is one of the greatest, if not the greatest reasons why the US Securities and Exchange Commission has refused giving its approval to bitcoin ETFs. According to the SEC, they do not stop or circumvent fraudulent practices to which investors are exposed to.

Fear Bitcoins ETFs will make Bitcoin prices more expensive: one of the proposed advantages of bitcoin ETFs is that it would bring bitcoins back to its original price. But, there is a fear that it will do just the opposite because of the withdrawal of large bitcoins from circulation. This would, therefore, increase the scarcity of bitcoin as an asset.

Custodial system of Bitcoin ETFs: the operational system of bitcoin ETFs can deter users who want to have their cryptocurrencies from actually investing in them.

Differences between Bitcoin ETFs and Blockchain ETFs

Bitcoin ETFs should not be confused with blockchain ETFs. Bitcoin ETFs simply focuses on bitcoin as its underlying asset and blockchain as the underlying technology behind bitcoin. Blockchain ETFs, on the other hand, is focused on tracking prices of companies investing in blockchain technology with the view of utilizing it.

Bitcoin, Crypto, Cryptocurrency

Five Types of Cryptocurrencies Other Than Bitcoin

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Five Types of Cryptocurrencies Other Than Bitcoin

Only ten years ago, little was known about cryptocurrencies. However, in the last couple of years, the market knowledge and the acceptance of the ideas of cryptocurrencies have dramatically increased. This sudden change is attributed to the popularity of the digital currency known as Bitcoin.

Essentially, Bitcoin was first mined in 2009. Since then, it has continued to evolve and is now known as the most popular cryptocurrency globally. In terms of market capitalization, Bitcoin has the highest-valued asset amongst all cryptocurrencies. Having a high market capitalization shows reduced risks for users. Thus, Bitcoin is thought by many to be the best choice for cryptocurrency investments.

Bitcoin
Bitcoin

Due to Bitcoin’s extreme popularity, a lot of other cryptocurrencies, known as “altcoins”, emerged. Below are just some of the most popular cryptocurrencies at present, to which some experts believe have the potential to dethrone Bitcoin in the long run. 

Ethereum

Ethereum was launched in 2015 as a software platform that allows Smart Contracts and Distributed Applications (DApps) to work without numerous interferences from different parties. Just like Bitcoin, Ethereum’s Ether is probably one of the most popular cryptocurrencies to date. Ether is also being managed by the principles of distributed ledgers and cryptography. However, the two are different in terms of their use–Bitcoin is a payment alternative while Ethereum is more on the enabling of peer-to-peer contracts and applications. 

Litecoin

 Launched in 2011, Litecoin is based on an open-source payment network that is not being managed by any central authority. As compared with Bitcoin, transactions in Litecoin are way faster (Litecoin transaction processes only take 2.5 minutes). Another advantage is that Litecoin’s algorithms are faster and a lot easier to decode and solve. 

Ripple

The next cryptocurrency, Ripple prides itself in processing transactions in as fast as four seconds (Ripple’s digital coins are known as XRP). For comparison, Bitcoin takes about 10 minutes to an hour while Ethereum takes about two minutes to do them. NOTE: old currencies normally take a few days to process. Ripple does this by creating platforms for banks to easily send money and convert them in different currencies. Aside from this, Ripple’s XRP is very cost-effective as it can allow users to send money without high transaction fees. 

Dash (DASH)

 Formerly called as Darkcoin (in 2014), Dash (2015) is an altcoin that was based from the protocol of Bitcoin. What’s interesting about this cryptocurrency is that its transactions are almost anonymous as they are worked on a decentralized master code network that does it so.  

Zcash

 Zcash is an open-source and decentralized cryptocurrency that is focused on privacy and selective transparency. In this case, while the transaction details are recorded on a blockchain, information about the sender and recipient, and the amount of money is not disclosed. Nevertheless, Zcash can still allow its users to open specific transaction data so that the cryptocurrency can be used in legal transactions. 

At present, there are already more than 1,600 cryptocurrencies in the market (and in fact, the number is still growing). And with such an enormous number to choose from, it would entail extensive research to know which one is the best for you. But then again, choosing which cryptocurrency to invest in is just the first step. If you want to consider investing in these cryptocurrencies, it would be helpful to think of them as the business they deserve to be.