Bitcoin Hit Two Milestones This Week

Investors are eager to learn what the long-awaited bitcoin futures exchange-traded fund means for their portfolios as it hits the market this week.

EFT’s were created in the 1990s as a type of investment that allows access to passive, indexed funds. The ETF structure was one of the most significant financial breakthroughs. Bitcoin has ushered in a new era of innovation, but it is still in its infancy.

On Wednesday, the commodity reached a fresh all-time high above $66,000. This came a day after the ProShares Bitcoin Strategy ETF, the first of its kind, debuted on the New York Stock Exchange. This advancement is significant in recognizing the legality of the asset class. However, in these types of ETFs, an actual bitcoin is neither bought nor sold during the trade’s execution. Therefore, it has no direct impact on market supply. Moreover, unlike stocks or bitcoin, futures contracts have expiration dates, and investors must “roll” their positions into the following month to avoid physical delivery of the underlying asset. Regardless, the institutionalization of bitcoin is, in theory, a good sign for investors.

An Innovative Strategy to Implement?

Perhaps not, says Eric Schiffer, CEO of private equity firm Patriarch Organization. “At this point, I think the average retail investor would be better off just buying bitcoin than playing the futures game,” he told Insider in an interview. “They’ll want to get much more educated and leave that work to quants and some of the enormous funds.”

However, audiences have a strong need for regulated financial services based on the realm of cryptocurrency. 

Morningstar’s global director of ETF research, Ben Johnson, stated that these ETFs received approval in a recent interview. This is because they do not directly invest in bitcoin but an existing established financial product. Suppose investors opt to invest in such a fund. In that case, they will have to negotiate the dangers of a volatile asset. They will also have to negotiate the risks of remaining exposed to bitcoin.

“By investing in actual bitcoin futures, you see that there are some challenges, most notably connected to sustaining that exposure,” he explained. Furthermore, he added that such funds invest in the front-month futures contract. What could happen in the process is that if that next futures contract, or those futures contracts, are trading at prices higher than the ones that the fund now owns, they will be systematically selling cheap and purchasing high.

Summary of The Week

It isn’t every week that bitcoin reaches a new all-time high. Hence this week was joyful, especially since the first two bitcoin ETFs in the United States debuted. This drove retail investors into a purchasing frenzy as the green candles continued. 

 Inflation in some of the world’s largest economies is on the increase, and economies are battling to overcome the burden of the COVID-19 pandemic. With continuous noise from money-printers in central banks worldwide, bitcoin is ready to surge even farther than it has this week.