Bitcoin
How Bitcoin ETFs Are Changing the Risk-Reward for Institutional Investors
As predicted, the launch of spot bitcoin exchange-traded funds (ETFs) in the US market has had a huge positive impact on the digital asset industry. A trigger is triggered stampede of retail investors and set records for bitcoin investment (BTC) and in ETFs.
Most importantly, being in a product approved by the U.S. Securities and Exchange Commission (SEC) changed bitcoin’s risk-to-reward ratio, bringing crypto back into the institutional investment conversation. This is sparking new interest from some companies and encouraging others to restart projects that had been put on hold. The door to the mainstream financial system has reopened.
Note: The opinions expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.
Institutional investors think about risk in many dimensions, some of them being: products, counterparties and the risks surrounding the underlying asset itself. In traditional finance (TradFi), all of this is well understood.
Products have become commoditized, with many companies offering similar products. Counterparties – market makers, custodians, clearing houses, etc. that help absorb commercial risk are well known. The different asset classes are also well understood and there are established ways of assessing the risks of a given asset.
Over many years, much of the risk and volatility has been eliminated from the system. These are black swan events that create problems. The risk is low, but so are the rewards. Opportunities to beat the market are hard to find.
What we have seen in crypto is a series of events that have had a negative impact but are predictable due to the lack of regulation and controls in the industry. The risk of these events happening has been too high for institutions to seek outsized rewards.
Bitcoin ETFs reduce risk in all three dimensions.
ETFs have been available in the US market for over 30 years. Everyone understands the product. Buying the asset in a securitized product is simpler than buying bitcoin outright. Many investors think it is the best route to pay a management fee to have someone else take care of custody, settlement risk, and other operational aspects of Bitcoin trading. They no longer need to take these risks directly.
The presence of big brands like BlackRock, Fidelity and others reduces counterparty risk. There are many native crypto custodians, liquidity providers, and market makers, but they are relatively unknown in the world of TradFi.
ETFs introduce some of the crypto universe’s dependent counterparties to general investors. Knowing that the big TradFi players have done due diligence on their finances, processes and procedures, and security practices reduces the fear factor. Additionally, it shows who they could ask for help if they wanted to hold bitcoin and other digital assets and do spot trading in the future.
By approving bitcoin as an underlying product within the ETF space, the SEC has reduced the risk at the base level of the asset – namely the fear that crypto could be banned outright in the US, obviously greater regulatory clarity could further reduce the asset risk, but market demand for ETFs led the agency to resolve some important issues. It also pressured ETF issuers to implement many of the simple risk-reducing elements that institutional players hope to see.
All of these elements create confidence in the market, which is crucial to resuming the journey of digital assets into the mainstream. There is a lot of ideology, jargon and technical terms surrounding cryptography. But essentially it’s just another asset class that uses a different technology.
Before FTX, many people left these risks aside and focused on price appreciation and gaining market access. After FTX, people are saying, I want to get involved, but I need to know that I’m protected on a basic level. ETFs do this while exposing institutional investors to crypto-dependent counterparties. They put the industry back on a positive path.
There are two things keeping institutions away from digital assets right now. One is philosophical. They neither believe nor like Bitcoin or cryptography. Then, there is a second group for whom the risk/reward ratio is not yet attractive enough. For these people, the success of ETFs makes it increasingly difficult to stay on the sidelines, especially when clients request crypto products.
The day will come when the main risk with Bitcoin and other digital assets will be in the base level of asset performance – just as with TradFi. It won’t be a decision or a product that magically makes this happen. It will be a long process, but eventually all questions about products, counterparties and regulations will disappear.
The only question will be: do you want to invest in digital assets or not?
Bitcoin
‘This is huge’ — Billionaire Mark Cuban issues ‘incredible’ Bitcoin and crypto prediction amid price slump
Bitcoin has surged again this year under former President Donald Trump Cryptocurrency boosts US presidential election in November with ‘revolutionary’ plan.
The price of bitcoin has surged to more than its all-time high in recent months, surpassing $70,000 per bitcoin and triggering a wave of mega-optimistic predictions about the price of bitcoinalthough it fell again this week to below $65,000 after the Federal Reserve kept interest rates steady.
Now, as Elon Musk suddenly breaks his silence on bitcoin and cryptocurrenciesBillionaire investor Mark Cuban called a California plan to digitize 42 million car titles using blockchain an “incredible step forward” and “huge” for cryptocurrencies.
Sign up for free CryptoCodex now—A daily five-minute newsletter for traders, investors, and crypto curious people that will keep you up to date and ahead of the bitcoin and crypto bull market
Mark Cuban, famous Shark Tank investor and billionaire owner of the NBA team Dallas Mavericks, has… [+] called a cryptocurrency update “amazing” amid bitcoin’s price slump.
Getty Images
The California Department of Motor Vehicles (DMV) has digitized 42 million car titles using blockchain, it was reported by Reuters, through technology company Oxhead Alpha on the Avalanche blockchain and designed to detect fraud and facilitate the securities transfer process.
“This is an incredible development for crypto,” Cuban, best known as an investor on TV’s Shark Tank and owner of the Dallas Mavericks NBA team, posted on X, joking that U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler could sue the state as part of his hostility toward cryptocurrencies and blockchain technology.
“The reason this is huge for crypto is because people who hold the tokens will have an app with an Avalanche wallet,” Cuban said. “Tens of millions of Californians having and using a crypto wallet in the next five years, or however long it takes, normalizes the use of wallets and crypto.”
John Wu, president of Avalanche developer Ava Labs, told Reuters that California’s DMV is “creating a wallet that you can download on your phone.”
Sign up for CryptoCodex now—A free daily newsletter for the crypto-curious
Bitcoin’s price has rallied this year, triggering a wave of bullish bitcoin price predictions from… [+] people like billionaire Mark Cuban.
Forbes Digital Assets
Last month, Cuban predicted that if the US dollar falls as the global reserve currency, bitcoin could become “a global ‘safe haven’” and a “global currency.” potentially sending the price of bitcoin to a much higher level.
According to Cuban, bitcoin could become what its most ardent supporters “envision” — a means “of protecting our economies… This is already happening in countries facing hyperinflation.”
The price of bitcoin has skyrocketed over the past year, largely due to the world’s largest asset manager, BlackRock, leading a bitcoin attack on Wall Street.
Please note that our Privacy Policy, terms of use, cookiesIt is do not sell my personal information Has been updated.
CoinDesk is a awarded media outlet that covers the cryptocurrency industry. Its journalists follow a strict set of editorial policies. In November 2023, CoinDesk has been acquired by the Bullish group, owner of Optimistica regulated digital asset exchange. The Bullish Group is majority owned by Block.one; both companies have interests CoinDesk has a portfolio of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial board to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.
U.Today – Renowned economist and cryptocurrency critic Peter Schiff has criticized Michael Saylor’s recent hype about the growing adoption of cryptocurrencies as a strategic treasury asset by corporations.
Michael Saylor, a well-known Bitcoin advocate and president of MicroStrategy, recently shared his enthusiasm on X about the growing adoption of Bitcoin as a strategic treasury asset.
Citing a comment made by Bitcoin investor Bill Miller in a recent interview with CNBC, Saylor tweeted: “We now have more companies coming forward and saying we will put Bitcoin on our balance sheet as a strategic treasury asset.”
However, not everyone shares Saylor’s enthusiasm. Schiff, a vocal Bitcoin critic and gold bull, was quick to respond with his usual skepticism. In a pointed tweet, Schiff argued: “Bitcoin is neither strategic nor appropriate as a treasury asset. Companies should not risk shareholder funds. They should pay dividends and let shareholders risk their own money.”
Bitcoin enthusiasts are not intimidated
However, Schiff’s criticism shouldn’t deter Bitcoin enthusiasts, who often take Schiff’s words with a pinch of salt. To put things in context, Michael Saylor began buying Bitcoin in 2020 as an inflation hedge and alternative to money. Saylor’s company, MicroStrategy, is among the largest public holders of Bitcoin in the world. As of June 20, it held 226,331 BTC, purchased for around $8.33 billion at an average price of $36,798.
Over the weekend, Schiff was surprised when 87% of the more than 11,000 Bitcoin holders who responded to his X survey said they would not sell any of their Bitcoin even if the price dropped more than 99% to $120. They said not only would they not sell, but that they would continue to buy even when prices dropped.
Schiff unexpectedly revealed that “the main selling point for investors to buy Bitcoin is its excellent past performance record.”
At the time of writing, Bitcoin is trading at $66,067, having reached all-time highs of nearly $74,000 in mid-March.
In a week of drastic fluctuations, the price of Bitcoin (BTC) has retreated from its highs and is currently trading at US$66,250, down 0.9% in European trading.
This volatility comes on the heels of a significant surge above $70,000 earlier in the week, fueled by former President Donald Trump’s ambitious cryptocurrency plans announced in a Bitcoin Conference in Nashville.
Trump’s announcement to fire Securities and Exchange Commission Chairman Gary Gensler and establish a strategic Bitcoin reserve if elected president has temporarily sent the cryptocurrency market into a frenzy.
However, the excitement was short-lived as a series of events unfolded which caused investor sentiment to sour.
A significant sell-off of about 8% was triggered when the US Marshals Service moved $2 billion in Bitcoin for new wallets.
This move has reignited fears of a potential large-scale liquidation, compounded by lingering concerns over a possible Bitcoin liquidation from Mt. Gox. Early this morning, Mt. Gox administrator transferred US$2.2 billion value of your BTC assets in a new wallet.
Meanwhile, the US Bitcoin ETF spot market is showing signs of fluctuation, according to data from SoSo Value. On July 30, Bitcoin spot funds experienced their first net outflow in five days, totaling $18.3 million.
The Grayscale Bitcoin Trust (GBTC) saw outflows of $73.6 million, while the BlackRock iShares Bitcoin Trust (IBIT) attracted $74.9 million in inflows. But outflows from other funds left the category in the red at the end of Tuesday’s trading session. The total net asset value of spot Bitcoin ETFs currently stands at a substantial $58.5 billion.
In other crypto news, Ripple (XRP) is up 8.6% in the past 24 hours, hitting over 64 cents – its highest point since March 25, according to CoinGecko. data.
This rally comes amid a scheduled token unlock and growing optimism around a potential deal in the long-running SEC vs. Ripple lawsuit.
The crypto community is closely watching the SEC’s actions, particularly its intention to amend its complaint against Binance regarding “Third-Party Cryptocurrency Securities,” which some interpret as a positive sign for Ripple.
On a market analysis noteSingapore-based cryptocurrency trading desk QCP Capital wrote that while election headlines continue to dominate, several crucial macroeconomic events loom on the horizon.
“Election headlines will continue to be a key focus, but several key macroeconomic events are also on the horizon. Key events starting with the FOMC meeting on Wednesday, megacap tech earnings (Apple, Amazon, Meta) throughout the week, and unemployment data on Friday,” QCP Capital wrote.
Edited by Stacy Elliott.
Trump’s economic plan and skyrocketing markets: are you ready?!
Cryptocurrencies are about to explode!! These predictions are CRAZY!
The United States is about to make Bitcoin history – you won’t believe it!
Crypto News: New High in BTC, Dogecoin, XRP, Aptos Alpha, SUI & More!
Trump’s INSANE new tariffs WILL SHOCK you! Here is the TRUTH
Ripple CTO and Cardano founder clash over XRP’s regulatory challenges ⋆ ZyCrypto
Nancy Pelosi Considers Supporting Republican Crypto Bill FIT21 – London Business News
Cryptocurrency News: Bitcoin, ETH ETF, AI Crypto Rally, AKT, TON & MORE!!
Bitcoin’s future is ‘bleak’ and ripe for regulation, says lead developer
The trader earned $46 million with PEPE after reaching a new ATH
Trump’s economic plan and skyrocketing markets: are you ready?!
Cryptocurrencies are about to explode!! These predictions are CRAZY!
The United States is about to make Bitcoin history – you won’t believe it!
Crypto News: New High in BTC, Dogecoin, XRP, Aptos Alpha, SUI & More!
Trump’s INSANE new tariffs WILL SHOCK you! Here is the TRUTH
-
Regulation7 months agoRipple CTO and Cardano founder clash over XRP’s regulatory challenges ⋆ ZyCrypto
-
Regulation5 months agoNancy Pelosi Considers Supporting Republican Crypto Bill FIT21 – London Business News
-
Videos6 months agoCryptocurrency News: Bitcoin, ETH ETF, AI Crypto Rally, AKT, TON & MORE!!
-
Regulation6 months agoBitcoin’s future is ‘bleak’ and ripe for regulation, says lead developer
-
News6 months agoThe trader earned $46 million with PEPE after reaching a new ATH
-
Blockchain6 months agoSolana ranks the fastest blockchain in the world, surpassing Ethereum, Polygon ⋆ ZyCrypto
-
Blockchain6 months agoSolana Surpasses Ethereum and Polygon as the Fastest Blockchain ⋆ ZyCrypto
-
Regulation6 months ago🔒 Crypto needs regulation to thrive: Tyler Cowen
-
Videos6 months agoWho Really CONTROLS THE MARKETS!! Her plans REVEALED!!
-
Videos7 months agoKucoin safe?? Exchange REVIEW and beginner’s guide!!
-
Blockchain6 months ago“Liquid vesting” is an oxymoronic feature of blockchain that allows early investors to sell without waiting
-
Videos6 months agoInstitutions purchasing MEMECOINS?! Everything you need to know!