Have you been living under a rock lately?
If not, you’ve probably seen the recent headlines about bitcoin:
For the first time ever, it crossed $66,000. Which means it’s up 100% since earlier this year.
But that begs the question: why are bitcoin investors so optimistic right now?
Today I’ll explain what’s happening…
Then I’ll show you a brand-new way to play the bitcoin trend.
From Back Alleys to Main Street
Before I explain what’s happening here, let’s take a step back and look at bitcoin’s history.
Bitcoin was invented back in 2008. But for the first several years of its existence, it basically operated in the shadows. It was primarily used by tech enthusiasts and niche groups of investors.
However, over the past few years, it’s gained massive adoption. Everyone from retailers like Amazon to government agencies like the IRS have begun to accept it as a form of payment.
Today, with an individual bitcoin trading for $66,000, and a market cap of over $1.1 trillion, bitcoin is now the world’s leading cryptocurrency.
But to be clear, bitcoin and cryptocurrencies in general are still relatively niche investments.
For instance, even though bitcoin is now valued at more than $1 trillion, the U.S. stock market is valued at roughly $50 trillion.
Furthermore, while Coinbase, the country’s leading crypto exchange, has roughly 2.3 million active trading accounts, the top four online stock trading platforms boast over 60 million active trading accounts.
So, clearly, crypto still has a ways to go before it’s truly a “Main Street” asset class.
Bitcoin Ready for Wall Street?
But a major event happened this past week — something that may indicate we’ve hit a “tipping point” for bitcoin and other cryptocurrencies…
And this event is what’s responsible for bitcoin rocketing past $66,000 this week.
What’s this big event I’m referring to?
The launch of the world’s first Bitcoin ETF.
ETF powerhouse, ProShares, took its Bitcoin ETF public on the NYSE this week — you can look it up under the symbol BITO.
In just 48 hours, over $1.1 billion in capital flowed into this new ETF. And those inflows are expected to grow dramatically…
You see, for individuals, investing in an ETF is easy. You can do it through your regular brokerage account. No need to jump through any hoops setting up a new account on an exchange like Coinbase.
On top of that, an ETF gives institutional investors and financial advisors an easy way to give their clients exposure to cryptos.
And this helps explain why bitcoin’s price shot up this week: as more and more capital flows into this new fund, investors expect demand for bitcoin to go through the roof.
The thing is, these expectations might be misplaced — i.e., wrong.
Let me explain…
Proceed with Caution
Generally speaking, an ETF accepts money from individuals like us, and then funnels it into the underlying investments that the ETF is focused on.
For example, a gold ETF invests in gold.
But that’s NOT what’s happening here — and it’s why I believe some of the bullishness around bitcoin is a bit overblown at the moment.
You see, the ProShare Bitcoin ETF isn’t truly a “Bitcoin ETF”…
In other words, it will not be investing directly into bitcoin…
Instead, it’ll invest in bitcoin futures.
In case you’re not familiar, futures are basically like options. They allow investors to bet on the price direction of an asset over specific periods of time, without buying the asset directly.
Meaning, if the ProShares Bitcoin ETF eventually has $100 billion in assets under management, that $100 billion won’t flow into bitcoin…
Instead, it’ll flow into bitcoin futures contracts.
That’s why I believe the bullishness around bitcoin right now is misplaced.
Why I’m Still Bullish on Bitcoin
With that said, I do believe this ETF is a positive sign for bitcoin and cryptos in general…
This fund’s success clearly shows that there’s real demand for bitcoin among individual and institutional investors.
It also sends a clear signal to the SEC that it needs to come up with a regulatory framework around cryptocurrencies so we can one day have access to a true Bitcoin ETF.
Once that happens — and I believe it will — then bitcoin’s price could surge even higher. Why? Because trillions of dollars would be able to flow directly into bitcoin.
Until then, the ProShares Bitcoin ETF is a good solution. It offers an easy way for individual investors to dip their toes into the “crypto waters.”
Essentially, it gives you the chance to capture some of the upside of bitcoin — without the complexity of buying the actual currency.
Happy investing.
Best Regards,
Founder
Crowdability.com
