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Will Bitcoin ETFs revolutionise the market in the same way as gold ETFs?
Jason Welz – Head of Digital Assets at Jaltech
In early January 2024, the United States’ most influential financial regulator, the Securities and Exchange Commission (SEC), approved the launch of eleven spot Bitcoin ETFs after over a decade of rejections because the market was underdeveloped and prone to manipulation.
While Bitcoin ETFs have been available in the US since October 2021, the newcomers differ in one key respect; they acquire their exposure to the flagship digital asset by holding actual Bitcoin instead of through futures contracts. This not only means that demand translates directly into physical demand for Bitcoin, but it also means that the ETFs performance is not weighed down by the inherent costs and inefficiencies of holding futures contracts that result in not only tracking error, but underperformance, too.
The issuers of these ETFs have been competing fiercely to gain market share. As a result, these products are incredibly attractive to investors from a cost and convenience perspective – passing on the complexity of storing and securing the digital asset investment to the ETF operator (in the same way Jaltech crypto products have been doing since 2021).
By allowing everyday investors in the world’s largest economy access to Bitcoin through their regular brokerage and retirement accounts, these Bitcoin ETFs are widely expected to revolutionise the market like the 2004 launch of gold ETFs did.
The anticipation in recent months of the SEC’s decision, combined with strong macroeconomic fundamentals, and the reduction in Bitcoin’s inflation rate coming this May, have catalysed a massive rally in Bitcoin, as well as most crypto assets. Over 2023, Bitcoin almost tripled in value.
Source: Jaltech, CoinMarketCap The pessimistic view is that these developments have now been accurately priced in by the market, pointing to the pullback in prices since last week’s approvals. But if the 2004 launch of gold ETFs are any guide – the party may just be starting. Sustained inflows into the asset are likely to kick off in earnest as the various ETF providers accelerate their marketing efforts, and as investors’ financial advisors begin to recommend the addition of Bitcoin exposure as part of their client’s long-term retirement savings.
Source: World Gold Council After gold ETFs launched, the price steadily rose from $375 to $454, but had dipped back to $411 by early February. This is not dissimilar to the price action we have begun to see in Bitcoin – however, financial asset prices do not move in straight lines, and corrections are inevitable. If you had held through these dips, your gold investment in 2004 would have paid massive dividends over the coming decades. Now may be a good time to begin building your investment position.
Jaltech offers three regulated cryptocurrency securities to South African investors: a product with pure Bitcoin exposure, a product with pure Ethereum exposure, and a diversified bundle of 15 crypto assets selected by Jaltech’s expert team and weighted by market capitalisation. Investment options include lump sum and debit order investments for those seeking to diminish the impact of market timing on their returns.
Much like ETFs, these investments provide clients with hassle-free exposure to the cryptocurrency market, with the diversified basket offering a useful tax wrapper – shielding you from the tax reporting obligations of the frequent quarterly portfolio rebalancing and diminishing the need to keep track of market developments to ensure your portfolio is sufficiently diversified and exposed to high-quality crypto assets. Jaltech uses institutional-grade technology to ensure the security of the assets held on behalf of investors.
source:Will Bitcoin ETFs revolutionise market same way as gold ETFs? (biznews.com)
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