The Bitcoin ETF broke Wall Street records

Cryptocurrency’s journey into the mainstream hit a significant milestone this week when the first funds traded were exchanged for bitcoin Made its stock market debut. Put more simply, that means anyone with a brokerage account will soon be able to buy and sell a bitcoin -backed financial product on the stock market. This comes after years of U.S. financial regulators avoiding cryptocurrency, which is famously changing. But now, the government seems willing to try new things.

The debut a big hit. After executives from ProShares, the Maryland-based company behind the ETF, hit the New York Stock Exchange on Tuesday morning, the product topped $ 1 billion worth of sales on its first day. It does one of the leading ETF debuts in history. Later in the day, the price of bitcoin soared in the past it is high at all times at $ 64,895 up to a new record of $ 66,975. The experts seem to have no surprise.

“It’s a blockbuster, smash, home run debut,” Eric Balchunas, a senior ETF analyst at Bloomberg, told me. “It brings a lot of legitimacy and eyeballs to the crypto space.”

But before we understand why that is, there are probably a lot of questions about the terms being confused here. For example, what on Earth is an “exchange-traded fund linked to bitcoin?” What is meant by “futures-based”? And should most people pay attention to cryptocurrency after so many years of probably not paying attention to cryptocurrency? We each have these questions.

A traded fund, or ETF, is a basket of security tied to the price of assets, such as stock, bonds, or commodities, to be bought or sold on the stock exchange; anyone with a brokerage account can trade ETFs. An ETF linked to bitcoin, naturally, tied to the price of bitcoin, and under the Investment Company Act of 1940, all new ETFs must be registered with the Securities and Exchange Commission. This detail is important because the agency’s approval of a bitcoin ETF suggests that it is open to allow many cryptocurrency-tied products to be sold. While the SEC does not consider cryptocurrencies to be security in the past, the most recent development suggests that its perspectives are about progressive development.

But it seems like it will be a long time before the SEC decides whether it will allow bitcoin to be traded on the stock market. ProShares ’new fund, called the Bitcoin Strategy ETF, is futures-based. That means the fund tracks bitcoin futures contracts traded on the most regulated Chicago Mercantile Exchange. That is, the ProShares Bitcoin Strategy ETF does not contain bitcoin itself but rather bets on the future price of bitcoin. on a Tuesday show on CNBC, SEC chairman Gary Gensler pointed out that the new product will be administered by the Commodity Futures Trading Commission, the SEC’s sister agency, which will provide others protecting investors – but it’s still a “thoughtful asset class.”

Despite the subtle details, this new bitcoin-based ETF is a factor. The cryptocurrency community has been yearning for a financial product like this for years, but regulators are hesitant to approve one. Cameron and Tyler Winklevoss put up their first bitcoin -based ETF in 2013, but the SEC rejected their first application four years ago – and again in 2018 – cited the frequency of the crypto market. Since then, the SEC there are delayed decisions of various bitcoin-based ETFs, but are now considering several new proposals, which are subject to 75 days of review after they are submitted by the companies. If the SEC does nothing, what happens in the case of ProShares, the funds can start trading. Over the next two weeks, the SEC’s review stages for cryptocurrency -based proposals from other companies, including Valkyrie Investments, Invesco, and VanEck, finish again.

“This particular ETF will not bring in hundreds of millions of dollars or anything,” Balchunas explained. But it’s an important moment because “It’s a bridge to this other world that probably isn’t that in crypto and can start already, now that it’s delivered in the format they want.”

That is, many crypto -based ETFs are almost here. And if Gensler sees these new financial products being sold without incident, his SEC could open up even more, including those that actually have cryptocurrencies, such as bitcoin and ethereum. The availability of these ETFs not only means that investing in crypto is faster. It also means bitcoin exists you are more like gold than before.

This story was first published in the Recode newsletter. Sign up here so you don’t miss the next one!

Source link


Leave a Reply

Your email address will not be published. Required fields are marked *