Opinion – The cryptocurrency market seems to be on the midst of a recovery from more than 3 months of falling prices. Many are attributing the cause to the growing interest from institutional investors. However, the main catalyst for the current optimism in the markets could actually be the news that the U.S. Securities and Exchange Commission (SEC) is currently weighing whether to approve a Bitcoin exchange-traded fund (ETF).
What is an ETF?
An ETF is basically a basket of securities that are bought and sold through a brokerage firm or stock exchange. ETFs are offered for almost all asset classes ranging from traditional investments to alternative assets like commodities or currencies.
The main benefit of an ETF is that it removes the need for investors to sign up on exchanges or wallets just to buy Bitcoin. With an ETF, the underlying assets are owned and traded by a fund. The Fund divides ownership of the cryptocurrency assets into shares, which are what investors’ actually claim ownership of at the end of the day. ETF shareholders receive a portion of the funds profits through dividends or earned interest paid.
Bitcoin price boost
The approval of a Bitcoins ETF would open the floodgates for new investors to pour money into cryptocurrencies with the same ease in which they invest in stocks and all other mainstream asset classes today. This would very likely lead to a surge in Bitcoins price from $7,500 to $10,000 or even it’s all time high of $20,000.
ETFs have a history of boosting asset prices
We have seen this ETF experiment play out before with Gold. In 2003, the first gold ETF was introduced to the markets, leading to a 300% price surge. That would be the equivalent of a $22,500 price tag for just for 1 Bitcoin.
There are still many hurdles in the way before ETFs can officially be approved, plus an ETF proposal was made last year by the Winklevoss twins (of crypto exchange Gemini) and subsequently rejected on the grounds that Bitcoin was simply too volatile.
However, based on changing sentiments by the SEC, experts are indicating that we could see ETF approval as early as August 15th. If early market reactions are any indicator, now might be a great time to start buying up some more Bitcoin and Altcoins while their prices still remain relatively cheap.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.