Tag Archives: etf

Why is Bitcoin stagnated despite $2B in spot ETF inflows?

Why is Bitcoin stagnated despite $2B in spot ETF inflows?

Bitcoin has experienced a 6.7% drop after almost reaching $72,000 on May 21, settling at $67,100. This decline does not necessarily signal a bearish trend, as Bitcoin is still only 8.7% below its all-time high. However, investors are puzzled why the recent inflows into Bitcoin spot exchange-traded funds (ETFs) haven’t sparked more bullish sentiment.

Distribution of assets by the failed Mt. Gox exchange estate

Data from Farside Investors reveals $1.96 billion in net inflows into U.S. spot Bitcoin ETFs since May 15, equivalent to 64 days of BTC issuance from miners. Notably, the U.S. spot Bitcoin ETF market has now exceeded $50 billion in assets under management. In comparison, U.S. gold ETFs hold about $118.5 billion, according to the World Gold Council.

Moreover, inflows into spot Bitcoin ETFs typically prompt the withdrawal of Bitcoins from exchanges, which has dropped to its lowest level since March 2018—2.3 million BTC, as per Glassnode data.

Aggregate Bitcoin balances on exchanges, BTC. Source: Glassnode

Although there’s no certainty these coins will be sold in the near term, their transfer to cold storage and custodians outside of exchanges usually reduces market liquidity. This issue becomes more pronounced in bull markets, where thinner order books at higher price levels can amplify price movements due to aggressive buying.

Consequently, if institutional investors continue to acquire Bitcoin through ETFs yet the price keeps falling, it’s likely that selling pressure originates from the regular spot markets. It’s suggested that the movement of 141,686 BTC by the bankrupt Japanese exchange Mt. Gox on May 28 indicates an imminent asset distribution to its creditors, ahead of the scheduled deadline on October 31.

Over $9.4 billion worth of Bitcoin is owed to about 127,000 creditors of Mt. Gox, who have been waiting for over a decade since the exchange’s collapse in 2014 due to multiple hacks. Despite the short-term negative impact on Bitcoin’s price, Anndy Lian, an intergovernmental blockchain expert, believes that repaying this debt will resolve a longstanding issue and permanently remove the associated uncertainty.

Regulatory uncertainty and the anti-crypto lobby

Among the reasons prompting Bitcoin holders to cash out above $67,000 is the regulatory uncertainty in the United States. The U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission have taken legal actions against leading exchanges and intermediaries, including Binance, Coinbase, Kraken, KuCoin, and Robinhood.

Additionally, the U.S. Department of Justice has levied charges against the co-founders of Tornado Cash and the developers of Samourai Wallet for money laundering, as well as against Roger “Bitcoin Jesus” Ver for allegations of tax evasion and fraud dating back seven years. Although these events do not directly affect Bitcoin, they tarnish the industry’s image, making it less appealing to institutional investors.

This issue extends beyond the U.S. For instance, Hong Kong’s Securities and Futures Commission has issued an ultimatum to cryptocurrency exchanges that have not yet registered to operate in the area. As of May 31, only 18 exchanges have applied for a license, with major players such as OKX, Huobi, and Gate opting out due to the stringent regulatory requirements imposed by Hong Kong.

In addition to ongoing legal challenges and Wells notices, there’s a persistent political backlash against cryptocurrencies. On May 29, U.S. Senators Elizabeth Warren and William Cassidy addressed a letter to the Drug Enforcement Administration, claiming that cryptocurrencies have “played an increasingly prominent role” in the fentanyl trade. Senator Warren has previously faced criticism for using unreliable data in discussions about terrorism.

These factors, together with the potential impact on cryptocurrency intermediaries and the possible selling pressure from the distribution of Mt. Gox coins do not set a definitive upper limit for Bitcoin at $70,000 or similar levels. It remains to be seen whether spot ETF investors will maintain their positions as the U.S. debt continues to escalate. For now, the market appears to be under bearish control in the short term.

 

 

Source: https://cointelegraph.com/news/why-is-bitcoin-stagnated-despite-2b-in-spot-etf-inflows

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
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Ethereum ETF: Investors Wait For May 23 Full of FUD

Ethereum ETF: Investors Wait For May 23 Full of FUD

May 23, 2024 is a key date for Ethereum (ETH) investors across the world. On this day, the U.S. Securities and Exchanges Commission (SEC) will announce its verdict on VanEck’s spot ETH exchange traded funds (ETF) application.

A denial of VanEck’s spot ETH ETF application will likely mean that similar applications from Ark Investment, Grayscale, Franklin Templeton, Invesco Galaxy, and BlackRock will also be rejected later in the year.

An approval from the SEC will likely spark a rally in ETH prices — similar to the ETF-supported Bitcoin (BTC) bull run we saw earlier in 2024.

Key Takeaways

  • VanEck is the first of many spot ETH ETF applicants.
  • The legal status of ETH as a commodity or security continues to be a hot topic of debate.
  • Bitcoin maxi Michael Saylor says altcoins will never get spot ETFs and commodity status.
  • Anndy Lian says ETF rejection could lead to short-term ETH price volatility and decrease in price.
  • Markus Thielen is comfortable holding a short position in ETH.

Pessimism Lingers over SEC Approval for Spot Ethereum ETF

The current mood regarding the launch of spot ETH ETFs in the U.S. is largely pessimistic.

The meeting between the SEC and spot ETH ETF applicants has been “one-sided” so far, insiders told Reuters. According to those who participated in the discussions, the SEC has not discussed “substantive details about the proposed products” nor asked issuers about concerns like they generally do when ETF applications are filed.

Crypto market observers will know that dealing with crypto skeptic SEC chair Gary Gensler is never a straightforward task. Even the recently approved spot BTC ETFs had to endure rejections of over 20 applications from the SEC between 2018 and 2023.

Given the fact that VanEck’s spot ETH ETF application is the first of its kind, CEO Jan van Eck expressed his pessimism at the Paris Blockchain Week crypto event, saying:

“We were the first to file as well for Ethereum in the U.S., and we and Cathy Wood (CEO of Ark Invest), are kind of the first in line for May, I guess, to probably be rejected.”

The Legal Status of ETH Hinders ETF Hopes

Additionally, the legal status of ETH continues to be a hot topic of debate. Despite the initial ETF denials, bitcoin never faced questions on its status as a commodity.

Anndy Lian, a governmental blockchain advisor and expert, told Techopedia:

“BTC has been generally recognized as a commodity by various regulatory bodies, including the CFTC. However, the SEC has not provided a clear stance on ETH’s classification, and recent comments by SEC Chair Gary Gensler have not explicitly categorized ETH as a commodity, which adds to the uncertainty.”

Adding to the fear, uncertainty and doubt was Bitcoin maximalist and co-founder of MicroStrategy, Michael Saylor, who said that it will soon be “very clear” that Ethereum is deemed a security not a commodity when the spot ETH ETF gets rejected in May 2024.

“After that you are going to see that Ethereum, BNB, Solana, Ripple, Cardano – everything down the stack – is just a crypto asset security unregistered. None of them will ever be wrapped by a spot ETF,” Saylor added.

 

“Wen Spot ETH ETF?”

While the growing consensus suggests that VanEck’s application will get rejected on May 23, 2024, industry insiders believe that a spot ETH ETF will eventually be approved later.

We look at the long road to the approval of spot BTC ETF as our reference.

Before its approval in January 2024, the SEC rejected every application placed before it. It was only when crypto fund manager Grayscale won a lawsuit against the SEC that spot BTC ETFs were finally approved in the U.S.

In their petition, Grayscale had argued that the regulation and surveillance that BTC futures ETF traded under were proof that spot BTC ETFs can be traded without fraud and manipulation.

Now market experts believe that the spot ETH ETFs will have to go down the same route to gain SEC approval — litigation.

“The template is likely to be similar to Bitcoin: with futures-based Ethereum ETFs already approved, the SEC (if it denies the approval of spot Ethereum ETFs) is likely to face a legal challenge and eventually lose,” said JPMorgan analysts in a report, as reported by The Block.

What Next for ETH?

Short-term Price Volatility

The market had hoped that positive developments on the spot ETH ETF front would be a major catalyst for ETH prices in 2024.

But now, dashed hopes of ETH ETF approvals coming as early as May 2024 has resulted in bearish ETH price movement (-24%) over the last two months, as of May 10, 2024.

With ETH continuing to underperform large-cap peers such as BTC, Solana (SOL) and BNB in 2024, the second-largest cryptocurrency will have to look for other market catalysts as it plays catch up.

“A rejection could lead to short-term price volatility and possibly a decrease in price as the market adjusts to the news,”  Lian told Techopedia.

Lian added:

“Even if the SEC rejects the spot ETH ETF, Ethereum may not run out of market catalysts. Other potential catalysts for a bull run could include technological advancements, increased adoption, further integration into DeFi, RWA, and the broader crypto market dynamics.”

ETH is the ‘Basket Case of 2024’

Elsewhere, Markus Thielen, founder of 10x Research, called Ethereum the “basket case” of this crypto cycle.

Thielen wrote in an email note to investors that this research firm was “very bullish” on Ethereum earlier in the year, but their view turned bearish when they noticed a sharp decline in Ethereum gas fees that “signaled (near) zero demand for transactions with ETH.”

Thielen also added falling staking yield (2.9% on Lido at the time of writing) and higher on-chain Treasury yields (5.1%) will result in less demand for ETH as “more people realize this.”

“Right now, we would be more comfortable holding a short position in ETH than a long one in BTC as Ethereum’s fundamentals are fragile, which is not yet reflected in ETH prices,” said Thielen.

The Bottom Line

The U.S. SEC under Chair Gensler is known for its hardball approach towards the crypto industry. The securities watchdog has filed multiple lawsuits against prominent crypto companies and personalities including CZ, Binance, Coinbase, Kraken, and Uniswap, over the past year.

Just like Grayscale’s lawsuit, which paved the way for spot BTC ETFs in the US, maybe only a mirrored approach can get spot ETH ETFs across the finish line in 2024.

 

Source: https://www.techopedia.com/ethereum-etf-decision

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j

Active ETF and AI: A Promising or Perilous Combination?

Active ETF and AI: A Promising or Perilous Combination?

Exchange-traded funds, or ETFs, are popular investment vehicles that offer exposure to a basket of securities, such as stocks, bonds, commodities, or cryptocurrencies. ETFs trade on exchanges like stocks, making them easy and convenient to buy and sell. Most ETFs are passively managed, meaning they track an index or a benchmark and aim to replicate its performance. However, some ETFs are actively managed, meaning they have a fund manager who makes decisions on what securities to include in the portfolio and when to buy or sell them. The goal of active ETFs is to outperform the index or the benchmark, rather than just match it.

Active ETFs have been around for more than a decade, but they have gained more attention and popularity in recent years, thanks to the emergence of new technologies and innovations. One of these innovations is artificial intelligence, or AI, which refers to the ability of machines or software to perform tasks that normally require human intelligence, such as learning, reasoning, and decision making. AI has been applied to various fields and industries, including finance and investing. Some active ETFs have started to use AI as a tool or a strategy to enhance their performance and gain an edge over the market.

But how does AI work in active ETFs? And what are the benefits and risks of this combination? I will offer my point of view on these questions, based on the information I gathered from various sources.

How AI Works in Active ETFs

There are different ways that AI can be used in active ETFs, depending on the type and the objective of the fund. Here are some examples:

  • AI can be used to analyze large amounts of data, such as market trends, economic indicators, company fundamentals, and social media sentiment, and generate insights and predictions that can help the fund manager make better investment decisions. For instance, the AI Powered Equity ETF (NYSE:AIEQ) uses an AI system called IBM Watson to build predictive models on the universe of U.S. equities and identify stocks that have the highest potential for capital appreciation. It is equal to 1,000 research analysts, traders and quants working around the clock.
  • AI can be used to automate the trading process, such as executing orders, rebalancing the portfolio, and adjusting the risk exposure, based on predefined rules and algorithms. This can reduce human errors, biases, and emotions, and increase efficiency and speed. For example, the BTD Capital Fund (NYSE:DIP) uses an AI algorithm to trade U.S. stocks based on momentum, volatility, and trend-following factors.
  • AI can be used to create new and innovative investment strategies, such as using natural language processing to analyze the transcripts of corporate earnings calls and identify signals of future performance, or using machine learning to discover hidden patterns and correlations among different asset classes and markets. For instance, the WisdomTree International AI Enhanced Value Fund (NYSE:AIVI) uses an AI model to enhance the value factor by incorporating alternative data sources, such as patent filings, web traffic, and news sentiment.

What Are the Benefits of AI in Active ETFs

The main benefit of using AI in active ETFs is that it can potentially improve the performance and the returns of the fund, by providing more accurate and timely information, by exploiting market inefficiencies and opportunities, and by adapting to changing market conditions. AI can also lower the cost and the risk of active management, by reducing the need for human intervention, by optimizing the portfolio allocation and the trading execution, and by diversifying the sources of alpha. Furthermore, AI can offer more transparency and accountability, by disclosing the methodology and the rationale behind the investment decisions, and by providing performance attribution and feedback.

Some evidence suggests that AI can indeed enhance the performance. For example, an article on CNBC mentioned that using IBM’s Watson platform, the AI Powered Equity ETF (AIEQ) is among the first ETFs to rely on AI for stock selection. It also mention that the information edge of AI is still unclear, but there are signs that some AI-based funds are doing better than their conventional peers. In another research paper published in 2022 by Rui Chen and Jinjuan Ren, titled ‘Do AI-powered mutual funds perform better’, which examined the broader AI capability in the mutual fund domain. They analysed the prospectuses from the EDGAR database of the US Securities and Exchange Commission. It matched them with AI-powered funds using mutual fund data from the CRSP Survivor-Bias-Free US Mutual Fund Database from January 2009 to December 2019. They discovered that these funds do not beat the market in general. However, a comparison reveals that AI-powered funds outperform human-managed peer funds significantly.

What Are the Risks of AI in Active ETFs

However, using AI in active ETFs also comes with some risks and challenges. One of these risks is that AI is not infallible, and it can make mistakes or errors, especially when dealing with complex, uncertain, and dynamic situations. AI can also be affected by data quality and availability issues, such as noise, bias, or gaps, which can impair its accuracy and reliability. Moreover, AI can be vulnerable to cyberattacks, hacking, or manipulation, which can compromise its security and integrity.

Another risk is that AI can be difficult to understand and explain, especially when using advanced and sophisticated techniques, such as deep learning or neural networks. This can create a lack of trust and confidence among investors, regulators, and auditors, who may not be able to verify or validate the logic and the outcomes of the AI system. This can also raise ethical and legal issues, such as accountability, liability, and fairness, when the AI system makes decisions that have significant impacts or consequences.

A third risk is that AI can create new and unforeseen problems or risks, such as market instability, systemic risk, or social and environmental harm. For example, AI can amplify market volatility and contagion, by triggering feedback loops, herd behavior, or flash crashes, especially when many funds use similar or correlated AI strategies. AI can also disrupt the market structure and the competitive landscape, by creating new winners and losers, by increasing the concentration and the power of a few players, or by displacing or replacing human workers.

Summing Up

In conclusion, active ETFs and AI are a promising or perilous combination, depending on how they are used and regulated.

On the one hand, AI can offer significant advantages and opportunities, by enhancing their performance, lowering their cost and risk, and increasing their transparency and accountability. On the other hand, AI can pose significant challenges and threats, by introducing errors and uncertainties, creating trust and ethical issues, and generating new and unforeseen problems and risks.

Therefore, investors, fund managers, and regulators need to be aware and cautious of the benefits and the risks of AI in active ETFs, and adopt appropriate measures and safeguards to ensure that AI is used in a responsible and sustainable manner. For myself, I hope to see how this will work on Bitcoin ETFs. I will try to collect more data to give you a follow up analysis on that.

 

Source: https://za.investing.com/analysis/active-etf-and-ai-a-promising-or-perilous-combination-200596385

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com
j j j