By Jasper Hamill
The price of bitcoin has hit an all-time high on October 20th in a rally that saw it smash through $65,000 and carry on climbing past $66,000.
Bitcoin’s previous ATH was $64,889, which it achieved in April before beginning a drawn-out slump to just $30,000 in July.
The market surge was linked to the launch of the first bitcoin-linked exchange-traded fund (ETF) in the United State, which will trade under the NYSE ticker name symbol BITO.
An ETF is an investment vehicle that can be bought or sold on a stock exchange. The launch of the first bitcoin ETF could be seen as a milestone in the path towards mainstream adoption of cryptocurrencies.
The ETF will be launched by ProShares, which said its new product allows investors to “gain exposure to bitcoin returns conveniently”. BITO can be bought and sold like a stock and eliminates the need for a wallet and exchange account. The fund will invest primarily in bitcoin futures contracts and will not directly invest in bitcoin.
Martha Reyes, Head of Research at digital asset prime brokerage and exchange BEQUANT described the launch of the bitcoin ETF in the US as “a watershed moment” which “we’ve been waiting for for years”.
“One billion dollars were traded on the day - a figure that was surprisingly high, signalling strong underlying demand for an easy to access vehicle despite the high costs - and we’re not even talking about a spot ETF,” she said. “The basis trade will add support to the spot market. It’s certainly created a snowball effect of institutional and retail FOMO.”
However, JP Morgan cast doubt on whether the launch of BITO would bring vast amounts of new money into the crypto markets.
"The bulls are seeing this ETF as a new investment vehicle that would open the avenue for fresh capital to enter bitcoin markets,” JP Morgan analysts wrote in a note.
“The bears are seeing the new ETF as the only incremental addition to an already crowded space of bitcoin investment vehicles."
The analysts added: "Will the launch of BITO by itself bring significantly more fresh capital into bitcoin? We doubt it given the multitude of investment choices bitcoin investors already have.”
One analyst predicted that another price rally was on the way, suggesting we’ve experienced the first leg of a longer bull market.
Mikkel Morch, Executive Director & Risk Management at crypto and digital assets hedge fund ARK36, said: “While a new all-time high is always a good moment to pause and celebrate for the Bitcoin bulls, it is important to recognize that the second leg of this bull market is in reality only about to start.
“More specifically, Bitcoin has been riding a wave of extremely positive fundamentals for the past few weeks and the on-chain data show a much stronger setup for an uptrend continuation than was the case for the April ATH.”
Morch said that up to 85% of all the 18.9 million bitcoin in circulation haven't moved in the past three months, because long-term hodlers have been accumulating crypto in the hopes that Q4 will see an epic price rally.
He added: “This creates perfect conditions for a supply squeeze scenario. All things considered, we are entering a completely uncharted territory with bitcoin in the price discovery mode where even a six-digit price tag isn't off the table anymore. However, as the markets go up, so will the volatility and investors should more than ever pay attention to the risk involved in investing in digital assets.”
ProShares CEO Michael L. Sapir said that 2021 will be “remembered for the first cryptocurrency-linked ETF.
He continued: “We believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts to launch one.
“BITO will open up exposure to bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs, but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider and creating a bitcoin wallet or are concerned that these providers may be unregulated and subject to security risks.”
“BITO will continue the legacy of ETFs that provide investors convenient, liquid access to an asset class.”
