October 19 is the day the world saw the debut of the first ETF on Bitcoin Futures, linked to the world’s most famous cryptocurrency.
It wasn’t listed on just any stock exchange, but rather began trading on the world’s largest and most famous exchange, the NYSE.
What led to the launch of Bitcoin ETFs
The ETF was launched just as BTC broke the $62,000 mark and came close to its April high of $64,896. The record was broken on October 20.
To give the news has been ProShares, the society that has succeeded to obtain the green light after various attempts (in the last four years the launch of approximately ten ETFs has been rejected) and after as many hesitations from the SEC (Security and Exchange Commission), the authority that regulates the American financial markets.
So what has changed?
First of all, the director of the SEC has changed. Jay Clayton had always been a very sceptical chairman, opposed to cryptocurrencies and possible ETF listings.
The new head, Gary Gensler, on the other hand, is an economist who is more open to the evolution of crypto and has therefore accepted ProShares‘ request.
Gary Gensler, the Chairman of the SEC, stated that:
“Bitcoin is a highly speculative asset, but it is a store of value that people want to invest in like some people would invest in gold.”
It is no longer mere enthusiasm, as Bitcoin has become a fully-fledged asset managed not only by small investors, but also by large banks and hedge funds around the world.
Interest in Bitcoin ETFs like the gold rush
Some of its dynamics cannot help but be reminiscent of the old gold rush in the western United States from 1848 to 1860.
Gold was indeed the most popular safe haven and store of value in the 19th century.
Even as early as 2020, when the great BTC rush began, some investors considered cryptocurrency to be a form of digital gold and therefore a store of value.
Gold vs Bitcoin
For many, however, cryptocurrencies are far removed from the mainstream investment universe and cannot compete with gold and other asset classes in a well-diversified investment portfolio.
It is worth noting that the correlation turned negative in 2021 as the volatility of cryptocurrencies exploded while gold declined.
However, a very important aspect they have in common, besides their possible scarcity, is that both assets have values that cannot be “inflated” by currency devaluation and are excellent as inflation hedges.
Gold and BTC are also correlated with other asset classes, which provides incontrovertible evidence that they are excellent diversifiers in an investment portfolio.
The growth in institutional adoption of cryptocurrencies is therefore inevitable, despite a challenging global regulatory environment.
What is likely to drive regulators, or even better investors, to accept or consider BTC as a store of value?
ETFs have been created and more and more will be added, the S&P DJI launched its first cryptocurrency indices in 2021 and the CBOE launched its first futures a few years ago.
It is now undeniable that many investors are looking for alternative assets to traditional bonds or stocks to hold in their portfolios as a store of value.
Pro-BTC investors point out that there are many reasons why there is a good chunk of weight dedicated to BTC in their portfolio.
Author: Giuseppe Pascarella
Giuseppe Pascarella is a financial analyst and the founder and CEO of PascaProfit Group, one of the leading Italian and European companies in the field of analysis.
Often a guest at important meetings with prominent figures such as Christine Lagarde (number 1 of the ECB) and Ursula Burns (former Obama advisor), he is also active in promoting financial literacy in Italy through his books “Battere il Benchmark” (“Beat the Benchmark”) and “Dove metto i miei soldi” (“Where I put my money”).