Tag Archives: Cryptocurrency

Crypto Markets: Bitcoin ETFs See Continued Approval Efforts

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.

Five Types of Cryptocurrencies Other Than Bitcoin

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. 

Financial Markets: Understanding The (Short) History Of Bitcoin

Financial Markets: Understanding The (Short) History Of Bitcoin

Bitcoin markets have had a tumultuous year so far in 2018, and many digital investors have wondered about the possibility that this is truly the end for cryptocurrencies.  The financial markets have a long history, and many different types of asset classes are represented within that history.  Bitcoin traders will need to remember this in the event that we start to see extreme price volatility in cryptos.

But it is also important to have a longer-term perspective when trading these assets.  Cryptocurrency is still in its infancy, but most of the people trading in these markets have little experience with the dynamics of economics.  This is a problem, and it essentially assumes that crypto investors can “sidestep” the normal research that would be required in any other market (i.e. stocks, bonds, real estate, precious metals, etc).  This is especially true for anyone trading on margin, and it is critical to spend time reading a margin trading guide on cryptocurrencies before placing active positions in the market.  Conservative position sizes are always preferable for anyone looking to make steady, consistent gains in any financial markets asset.

Asset Bubble Price Chart

For these reasons, it is important to adopt the historical perspective whenever we are looking to make investments in cryptocurrencies.  When investors fail to adopt this type of approach, it is essentially a recipe for disaster — and it is something that can quickly lead to financial losses.  In the chart above, we can see the typical stages of an asset bubble, which tend to be fairly predictable in nature.  This is why it is important to look at the history of the financial markets whenever we are dealing with a new asset like Bitcoin (and the other cryptocurrencies).  There is never a substitute for good, old-fashioned market research as it generally pays dividends through patience and conservative investment practices.

Asset Bubble Price Chart

The problem with cryptocurrency investing is that many of its participants expected significant short-term gains in a market that had not yet proven itself in terms of financial viability.  In this chart, we can see that many different asset classes have experienced similar price activity when compared to the recent trends in Bitcoin.  If anything, these trend actually validate Bitcoin as a viable market asset because it is following a path that is similar to what has been seen previously in gold, stocks, and many other market assets.

Anyone that has bought or sold a cryptocurrency is essentially a crypto trader, and crypto traders must remember that the history is still unfolding.  The main questions will be answered once consumers understand how these digital assets will actually be used in everyday markets. This is what drives the real economy, and without this type of use cryptos will only be viewed as speculative in nature.  Market speculation is what creates “asset bubbles” and the people that tend to lose the most money in those types of situations are the retail traders buying into the hype after people have already started to lose interest.  

Bitcoin History

In this chart, we can see a more linear history of Bitcoin, from its earliest days of inception right through to its acceptance by the market (by major tech organizations like Microsoft, and many other important market entities).  This history continues to unfold, and we are likely to see many interesting developments in the future in terms of the ways cryptocurrencies are traded and used for investment.  There is never any market approach or technique which can replace traditional market research, but there are rules of investment discipline which should be obeyed whenever we are looking to profit from the underlying trends in valuation.

Going forward, traders and investors will need to continue asking critical questions:  What are the underlying trends for the main cryptocurrencies? How many e-commerce store are accepting their use?  Have brick-and-mortar stores started to accept Bitcoin for their transactions? These are all questions which need to be asked whenever we are making an assessment of where these digital currencies are likely to head in the future.

It will also be important to remember that the cryptocurrency space goes beyond the use of Bitcoin.  There are many different cryptos which are now commonly traded, and those cryptos can even be traded in relation to one another.  This has opened up entirely new markets for those looking to make investments in the financial markets. These forecasts should be useful to a totally new set of traders, and this could continue for many years to come.