The talk in the crypto town for the past several days has predominantly been the potential launch of a Bitcoin ETF in the United States. After all, the country’s Securities and Exchange Commission has been reluctant to approve such a product for years, while other nations, like Canada and Brazil, did so earlier this year.
The pressure on the SEC is mounting, and the appointment of Gary Gensler, who previously had experience with blockchain, was regarded as a promising step in the right direction.
Community members and strategists even outside the space started to make optimistic predictions that a Bitcoin ETF could see the light of day by the end of 2021.
And now, just hours away from perhaps the first-ever BTC ETF going live in the States, albeit a futures-backed one, it’s worth reviewing the possible implications for the asset and the entire industry.
Sell The News Moment?
Let’s begin with exploring the so-called “buy the rumor, sell the news” moment. This is a popular strategy among traders who tend to accumulate in anticipation for a certain significant event in the future and sell their positions when it becomes official. The goal of this is to take advantage of the growing hype and front-run other participants.
And bitcoin’s price has indeed been on the rise ever since the reports of an upcoming futures-backed BTC ETF in the States intensified last week. The cryptocurrency broke above $60,000 for the first time since April and currently stands less than 5% away from painting a new all-time high.
Some experts do see this moment as the potential local top for the entire cryptocurrency market. Jim Cramer, the host of CNBC’s Mad Money, said recently he had sold a portion of his digital asset holdings as he anticipates a correction after the ETF goes live.
There’re no guarantees that Bitcoin will indeed head south at that point. However, traders should be wary of potentially volatile trading days because of the implications of such an important and long-awaited new product coming live under the purview of arguably the biggest market – the US.
The Shadow of the CME Futures Contracts
During the peak of the previous bull run in late 2017, the crypto community saw another significant development in bitcoin’s road to legitimacy with the launch of institutional-grade BTC futures contracts on two large exchanges – CBOE Global Markets and the Chicago Mercantile Exchange (CME).
While the former had a relatively short life, the latter often receives the blame for what transpired in the markets next. Bitcoin had just come off its ATH at the time of $20,000 but lost more than 80% of its value in the following year. Numerous analysts later blamed it on the manipulation of futures markets and CME in particular.
Now, four years later, the cryptocurrency is at the doorsteps of its arguably most crucial adoption event – a Bitcoin ETF in the United States – and some fear that the bear market of 2018 could repeat.
However, this scenario seems more unlikely now. The BTC landscape is significantly different now as the asset has come a long way in the past four years. It has seen countless “change of heart moments” in which former bashers became holders. It also saw the grand entrance of institutions and giant companies that hold billions of dollars worth of bitcoin on their balance sheets. Moreover, the current rally has shown no signs of exhaustion whereas the one in 2017 did the exact opposite at the time CME launched their futures.
The primary cryptocurrency has also grown into a trillion-dollar asset with a market capitalization larger than behemoths like Tesla and Facebook.
Legimaticy and Higher Demand
While it’s still uncertain whether BTC’s price will head south after the ETF goes live for trading in the short-term, one thing is for certain – such a product would help increase the cryptocurrency’s legitimacy among more old-school, traditional investors.
We’ve heard in the past how some prominent names that were used to allocate funds into safer tools like bonds or gold bashed bitcoin for the lack of regulatory certainty. This shouldn’t be the case once BTC receives the green light from the top securities regulator in the world’s largest economy.
The approval of a Bitcoin ETF, even if it’s a futures one (for now), should, in theory, make the cryptocurrency a legitimate investment option for many who have steered clear from the market until now.
Perhaps Douglas Yones – the head of exchange-traded products at the New York Stock Exchange (where the ProShares’ Bitcoin ETF is expected to go live) – explained the situation best, saying, “this is an exciting step but not the last.”