Bitcoin (BTC), which had fallen below $30,000 in June, rallied for nearly four months, gaining more than 100%. After closing Friday’s trading session with a 7.56% increase, Bitcoin (BTC) was able to regain the $60,000 level. The excitement surrounding the SEC’s approval of the ProShares Bitcoin Futures exchange traded fund (ETF) was responsible for the rally that followed. Bitcoin has since successfully maintained its current price and moved closer to $64,899.
ProShares Bitcoin Strategy ETF was listed on Tuesday. This listing is expected to give Bitcoin and other cryptocurrencies an extra boost to mainstream legitimacy. The key feature of the new Bitcoin ETF, however, is that it does not invest directly in Bitcoin but rather allocates part of its assets to BTC Futures Contracts.
ProShares Bitcoin Strategy ETF was listed as “BITO”, on the New York Stock Exchange. This is the first such ETF, some say it is 10 years in making. Many Bitcoin ETFs have been either blocked or held up by the United States Securities and Exchange Commission (SEC).
The VanEck and WisdomTree Bitcoin ETFs are two of the most prominent applications still unapproved. ProShares was granted the go-ahead because it has a unique distinction: The ProShares Bitcoin ETF (ProShares Bitcoin ETF) is a futures-based ETF and is filed under mutual fund rules.
This structure is preferred by the SEC because it doesn’t have jurisdiction over cryptocurrency trading venues not registered in the United States.
According to the prospectus filed with SEC, the fund will dedicate 25%-30% of its assets for Bitcoin futures contracts. It also states that it will invest in securities of ETFs listed for trading in Canada and other pooled investment vehicles.
These positions can be used to manage outflows and inflows to respond to market conditions or increases in margin requirements. The fund will allocate a larger portion of its assets to money market instruments. These are subdivided into U.S. Treasury Bills, repurchase and reverse repurchase contracts.
A Bitcoin ETF allows the whole market access to cryptocurrencies, similar to the Coinbase listing on a stock exchange. Investors who do not have access to cryptocurrency but have brokerage accounts will be able to get exposure to Bitcoin.
Michael Sapir, ProShares CEO, stated in a statement that BITO offers exposure for investors who purchase stocks and ETFs but don’t necessarily want to go through all the hassle of setting up a wallet or buying Bitcoins from an exchange.
BITO could be a precursor to other investment product offerings. Grayscale Investments, the biggest digital currency asset manager, has already confirmed that it plans to convert its flagship GBTC cryptocurrency into an ETF. Jennifer Rosenthal, Grayscale Communications Director, confirmed this. Grayscale CEO Michael Sonnenshein stated that an Ether-based ETF would likely follow after BITO’s success.
These are not the only announcements this week. Another futures-based Bitcoin ETF will also be made. SEC filings indicate that the company accepted the request to list Valkyrie’s Bitcoin Strategy ETF shares on the Nasdaq. After receiving approval from AMF, the French financial regulator, Melanion Capital is set to launch its Bitcoin-linked ETF. Melanion BTC Equities Universe ETF, which invests in a broad range of equities that are correlated with the daily price movements for Bitcoin, will be listed on Euronext Paris.
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Open interest rising
Open interest in BTC futures has also increased due to Bitcoin’s positive trading activities. Open interest in BTC futures topped $23.1 billion as of Oct. 18, according to data from crypto exchange Bybit. This figure reached its peak in April, when total open interest across multiple exchanges was $27.38 billion.
Binance, which has $5.3 billion in contracts, is currently leading the list of exchanges with the largest dollar values. The Chicago Mercantile Exchange Group is third with $3.5 Billion, despite having its futures open interest reaching an eight-month peak. Open interest is the number of futures contracts still to be settled. This is used to determine the strength of a market trend or market sentiment.
Many investors feel that Bitcoin’s rebound has led to a surge in confidence that BTC will see an even greater price rise, even though many believed that the newly-listed Bitcoin ETF had been priced weeks ago. Investors had been betting on the bullish story at the beginning of the year, and now it is back.
Prices reached as high as $74,000 for the futures contract that had a December settlement date. This has been whittled during a cooling period in the market, but it has aligned with the rising spot prices.
The trend is to place wagers on Bitcoin prices reaching $100,000.
The growth in wallet addresses is one way to determine whether higher prices are viable in the future. Adoption plays a significant role in this. While Brazil isn’t ready to join El Salvador in making Bitcoin legal currency, such moves will likely increase number of wallet addresses.
According to data, wallet addresses have been steadily increasing since October 2020. There are currently 77 million addresses. There is data that shows “hodlers”, addresses that keep their BTC for at least one year, are also increasing in numbers.
As new products that are tied to Bitcoin may be approved in the near future, institutional participation could increase. Even with BITO, a new category of investors is possible, including those who are pension funds or retirement accounts. The new Bitcoin ETF, regardless of Bitcoin’s eventual value to $100,000, shows Bitcoin is a legitimate investment.
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