January 9th, 2024

Why Bitcoin ETF Approval is Not Important Any More

Bitcoin ETFs, or exchange-traded funds that track the price of Bitcoin, have been a long-awaited and highly anticipated product in the crypto space. For years, investors have hoped that the U.S. Securities and Exchange Commission (SEC) would approve a Bitcoin ETF, as it would provide a convenient and regulated way to gain exposure to the leading cryptocurrency.

However, after several rejections and delays, the SEC has yet to approve a spot Bitcoin ETF, which would hold actual Bitcoin in custody. Instead, the SEC has only approved Bitcoin futures ETFs, which track the price of Bitcoin futures contracts traded on regulated exchanges. These ETFs have their own drawbacks, such as high fees, tracking errors, and rollover risks.

Moreover, the demand for Bitcoin ETFs has been declining, as investors have found other ways to access Bitcoin, such as through crypto exchanges, wallets, apps, and platforms. These alternatives offer more flexibility, security, and control over one’s Bitcoin holdings, as well as lower costs and better performance.

Declining Demand for Bitcoin ETFs

One of the main reasons why the approval of a spot Bitcoin ETF is not important any more is that the demand for Bitcoin ETFs has been declining as investors have found other ways to access Bitcoin.

Based on a report, there were $1.9 billion of inflows from Bitcoin ETF last year. This represents 87% of the total inflows. This is a relatively small amount compared to the total market capitalization of Bitcoin, which was nearly $900 billion as of January 5, 2024, according to statistics from CoinMarketCap.

According to Forbes Advisors, the largest Bitcoin ETF, the ProShares Bitcoin Strategy ETF (BITO), had an AUM of around $904 million, followed by the ProShares Short Bitcoin ETF (BITI), which had an AUM of $69 million and VanEck Bitcoin Strategy ETF (XBTF) with $45 million. The other ETFs had less than $25 million each in AUM.

The low AUM of Bitcoin ETFs indicates that investors are not very interested in these products, as they have other options to access Bitcoin. For example, investors can buy and sell Bitcoin directly on crypto exchanges, such as Coinbase, eToro and Robinhood. These exchanges offer a variety of features, such as low fees, high liquidity, advanced trading tools, and custodial services.

Investors can also store and manage their Bitcoin in crypto wallets, such as Ledger, Trezor, and MetaMask. These wallets allow users to have full control over their private keys, which are the passwords that grant access to their Bitcoin. Users can also send and receive Bitcoin to and from anyone in the world, without intermediaries or restrictions. Investors can also access Bitcoin through crypto apps and platforms, such as Square, PayPal, and Bakkt. These apps and platforms enable users to buy, sell, and spend Bitcoin with ease and convenience, as well as integrate Bitcoin with other financial services, such as payments, lending, and rewards.

These alternatives to Bitcoin ETFs offer more flexibility, security, and control over one’s Bitcoin holdings, as well as lower costs and better performance. For instance, the expense ratio of Bitcoin ETFs ranges from 0.65% to 1.20%, which means that investors have to pay an annual fee of $6.50 to $12 for every $1,000 invested. On the other hand, the fees for buying and selling Bitcoin on crypto exchanges are much lower, typically ranging from 0% to 0.6%, depending on the volume and type of transaction.

Moreover, the performance of Bitcoin ETFs may not match the performance of Bitcoin itself, due to factors such as tracking errors, premiums and discounts, and rollover risks. Tracking errors occur when the price of the ETF deviates from the price of the underlying asset, due to market inefficiencies, liquidity issues, or technical glitches.

Premiums and discounts occur when the market price of the ETF differs from its net asset value (NAV), which is the value of its underlying assets. Rollover risks occur when the ETF has to sell its expiring futures contracts and buy new ones, which may incur losses or gains depending on the price difference.

These factors can result in Bitcoin ETFs underperforming or outperforming Bitcoin, depending on the market conditions. For example, take the reference point from January 1, 2023 to December 19, 2023.

ProShares Bitcoin Strategy ETF (BITO) price on January 1, 2023, was $14.54. On December 19, 2023, the price was $20.87. This represents a return on investment (ROI) of approximately 43.6% for this period. The Bitcoin spot price on January 1, 2023, was $16,540.69. On December 19, 2023, the closing price was $42,270.53. This represents an ROI of approximately 155.2% for this period. This means that BITO underperformed Bitcoin by 111.6%.

Therefore, the demand for Bitcoin ETFs has been declining, as investors have found other ways to access Bitcoin, which offer more flexibility, security, and control over one’s Bitcoin holdings, as well as lower costs and better performance.

Reasons Why the SEC Has Not Approved a Bitcoin ETF

Another reason why the approval of a spot Bitcoin ETF is not important any more is that the SEC has not approved Bitcoin ETF, despite the numerous applications and the growing maturity of the Bitcoin market.

The SEC has been very cautious and conservative in approving Bitcoin ETFs, as it has raised several concerns, such as market manipulation, investor protection, custody, valuation, and liquidity. The SEC has also been very slow and inconsistent in reviewing and deciding on the Bitcoin ETF applications that have been filed over the years.

One of the main concerns that the SEC has expressed is the risk of market manipulation, as Bitcoin is traded on unregulated and fragmented markets, which may be subject to fraud, hacking, or price distortion. The SEC has also questioned the reliability and accuracy of the Bitcoin price indices that are used by the Bitcoin ETFs to track the performance of Bitcoin.

Another concern that has been raised is investor protection, as Bitcoin ETFs may expose investors to high volatility, operational risks, and cybersecurity threats. The SEC has also emphasized the need for adequate disclosure and education for investors, as Bitcoin ETFs may involve complex and unfamiliar concepts and technologies.

A third concern that was cited is custody, as Bitcoin ETFs would have to hold actual Bitcoin in a secure and compliant manner, which may pose technical and legal challenges. The SEC has also stressed the importance of having qualified custodians and auditors for Bitcoin ETFs, as well as contingency plans for potential loss or theft of Bitcoin.

A fourth concern that the SEC has mentioned is the valuation, as Bitcoin ETFs would have to determine the fair value of Bitcoin on a daily basis, which may be difficult due to the lack of standardization and transparency in the Bitcoin market. The SEC has also highlighted the potential for discrepancies and conflicts between the NAV and the market price of Bitcoin ETFs, which may result in premiums or discounts.

A fifth concern that the SEC has pointed out is liquidity, as Bitcoin ETFs would have to meet the liquidity requirements and standards of the SEC, which may be challenging due to the limited availability and trading volume of Bitcoin. The SEC has also warned about the potential for market disruptions and price swings in the Bitcoin market, which may affect the liquidity and stability of Bitcoin ETFs.

These are some of the reasons in my opinion why the SEC has not approved Bitcoin ETF, despite the numerous applications and the growing maturity of the Bitcoin market.

The Delay and its Consequences

The final reason why the approval of a spot Bitcoin ETF is not important any more is that the delay in the SEC’s decision has not made much difference for the Bitcoin market or the adoption of Bitcoin.

Some analysts have speculated that the delay in the SEC’s approval of a spot Bitcoin ETF is due to the change in leadership and priorities of the SEC, as well as the ongoing regulatory and legal developments in the crypto space. For example, the SEC chairman, Gary Gensler, is known for his expertise and interest in cryptocurrencies, but also for his strict and rigorous approach to regulation. The SEC has also been involved in several lawsuits and investigations against crypto companies, such as Ripple and Coinbase.

However, the delay in the SEC’s approval of a spot Bitcoin ETF has not made much difference for the Bitcoin market or the adoption of Bitcoin, as Bitcoin has continued to grow and thrive without the need for a spot Bitcoin ETF. Bitcoin has exhibited a remarkable performance in 2023, reaching new highs and attracting more investors and users. Bitcoin has also gained more recognition and acceptance from governments, central banks, and financial institutions around the world.

Moreover, the delay in the SEC’s approval of a spot Bitcoin ETF has not deterred the innovation and competition in the crypto space, as more fund providers and issuers have launched and applied for different types of Bitcoin ETFs, such as futures ETFs, inverse ETFs, leveraged ETFs, and actively managed ETFs. These ETFs offer various strategies and features to cater to different investor preferences and risk appetites. However, these ETFs also have their own limitations and challenges, as discussed earlier.

Therefore, the delay in the SEC’s approval of a spot Bitcoin ETF has not made much difference for the Bitcoin market or the adoption of Bitcoin, as Bitcoin has continued to grow and thrive without the need for a spot Bitcoin ETF. Of course, I could be wrong too.

Still Important?

In conclusion, the approval of a spot Bitcoin ETF is not important any more, as it would not have a significant impact on the Bitcoin market or the adoption of Bitcoin. The demand for Bitcoin ETFs has been declining, as investors have found other ways to access Bitcoin, which offer more flexibility, security, and control over one’s Bitcoin holdings, as well as lower costs and better performance. Bitcoin is already a highly liquid and legitimate asset, with a global and decentralized network of users, miners, developers, and exchanges.

Bitcoin ETFs may still have some challenges and opportunities in the future, depending on the regulatory and market developments. However, they are not likely to be the catalyst or the driver for the growth and innovation of Bitcoin. Bitcoin ETFs are rather a reflection and a result of the evolution and maturation of Bitcoin, as it becomes more mainstream and accepted by the world.

Source: https://www.blockhead.co/2024/01/09/why-bitcoin-etf-approval-is-not-important-any-more/

Anndy Lian

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

November 2nd, 2023

Anndy Lian: Bitcoin Price Surges to $35,000, More Gains Ahead

Bitcoin, the world’s largest and most popular cryptocurrency, has been on a bullish streak lately, reaching $35,000 for the first time since May 2022. The digital asset has more than doubled in value this year as investors flock to it amid inflation fears, regulatory developments, and growing adoption.

One of the main drivers of Bitcoin’s rally is the anticipation of a spot Bitcoin exchange-traded fund (ETF) approval by the U.S. Securities and Exchange Commission (SEC). A spot ETF would allow investors to buy and sell Bitcoin directly on regulated stock exchanges without having to deal with crypto platforms or custody issues.

Several companies have applied for a spot in Bitcoin ETF, including BlackRock (NYSE:BLK), WisdomTree, Invesco Galaxy, Wise Origin, VanEck, Bitwise, and Valkyrie Digital Assets. The SEC has postponed its decision on these applications until November, but some analysts believe that the regulator will eventually greenlight at least one of them.

A spot Bitcoin ETF would be a game-changer for the crypto industry, as it would boost the liquidity, accessibility, and legitimacy of Bitcoin. It would also attract more institutional and retail investors to the market, creating more demand and driving up the price.

Another factor that is fueling Bitcoin’s rise is the upcoming halving event in 2024. The halving is a process that reduces the reward for mining new blocks of Bitcoin by 50% every four years. This creates a scarcity effect that increases the value of each coin. The halving also coincides with a cyclical pattern of Bitcoin’s price movements, which tend to peak about a year after each halving.

The last halving occurred in May 2020, when the reward dropped from 12.5 to 6.25 bitcoins per block. Since then, Bitcoin has surged from around $9,000 to over $35,000. The next halving is expected to happen in May 2024, when the reward will drop to 3.125 bitcoins per block. Many experts believe that this will trigger another bull run that could push Bitcoin to new heights.

One of them is Peter Brandt, a legendary trader and analyst who has been following Bitcoin since 2011. Brandt has recently shared his bullish chart that predicts new all-time highs for Bitcoin by the third quarter of 2024. He says that Bitcoin has hit its bottom at around $25,000 in July 2023 and will break out of its long-term range by mid-2024. He also suggests that Bitcoin will go through a period of consolidation or sideways movement until then.

Brandt’s chart shows that Bitcoin follows a series of bullish impulses followed by periods of correction. He expects that Bitcoin will reach around $40,000 in the short term, based on its convincing break above the $32,000 level. He then forecasts that Bitcoin will correct to around $30,000 before resuming its uptrend and reaching new highs above $70,000 by Q3 2024.

Brandt is not alone in his optimistic outlook. Other analysts have also made bold predictions for Bitcoin’s future price. Some of them include:

Alistair Milne, founder of Altana Digital Currency Fund, predicts that Bitcoin will surge to $45,000 depending on what happens with inflation.
Dan Tapiero, co-founder of 10T Holdings and Gold Bullion International, who believes that Bitcoin could reach $100,000 by 2025.
Tim Draper, billionaire investor and founder of Draper Associates and DFJ Venture Capital, expects that Bitcoin will hit $250,000 by mid-2023.
John McAfee, a software entrepreneur and crypto advocate, who claims that Bitcoin will reach $1 million by 2025.

Why I Think Bitcoin Will Drop to $29,000 Before Surging to $40,000

Bitcoin, the world’s leading cryptocurrency, has been on a roller coaster ride this year, reaching new highs and lows. As of writing this article, Bitcoin is trading at around $35,000, up from its recent low of $25,000 in July 2023. However, I believe that this rally is not sustainable and that Bitcoin will face another major correction before it can break out of its long-term range and reach new heights.

There are several reasons why I think Bitcoin will drop to $29,000 before it can surge to $40,000 and above. These include:

The lack of a spot Bitcoin ETF approval by the SEC
The increasing competition from other cryptocurrencies and technologies
The diminishing returns of the halving effect

Let me explain each of these points in detail.

The lack of a spot Bitcoin ETF approval by the SEC

One of the main catalysts for Bitcoin’s recent rally is the expectation of a spot Bitcoin ETF approval by the U.S. Securities and Exchange Commission (SEC). A spot ETF would allow investors to buy and sell Bitcoin directly on regulated stock exchanges without having to deal with crypto platforms or custody issues.

However, I think that this expectation is too optimistic and that the SEC will not approve any spot Bitcoin ETF anytime soon. The SEC has been very cautious and sceptical about Bitcoin and crypto in general, citing issues such as market manipulation, fraud, volatility, liquidity, custody, and investor protection.

The SEC has already postponed its decision on several spot Bitcoin ETF applications until November, but I doubt that it will grant any approval by then. The SEC has rejected or delayed every Bitcoin ETF proposal since 2013, and I don’t see any reason why it would change its stance now.

Therefore, I think that the market is overestimating the probability of a spot Bitcoin ETF approval and that this will lead to disappointment and sell-off when the SEC announces its verdict. I expect that this will trigger a downward pressure on Bitcoin’s price and push it below $30,000.

The increasing competition from other cryptocurrencies and technologies

Another factor that could weigh on Bitcoin’s price is the increasing competition from other cryptocurrencies and technologies that offer faster, cheaper, more scalable, and more innovative solutions.

Bitcoin is the first and most dominant cryptocurrency, but it is not the only one. There are thousands of other cryptocurrencies that have emerged since Bitcoin’s inception in 2009, each with its own features, advantages, and disadvantages.

Some of these cryptocurrencies are challenging Bitcoin’s supremacy in different aspects, such as:

Ethereum, which is the second-largest cryptocurrency by market cap and the leading platform for smart contracts, decentralized applications (DApps), decentralized finance (DeFi), non-fungible tokens (NFTs), and more.
Cardano, which is the third-largest cryptocurrency by market cap and a rival to Ethereum that claims to offer a more scalable, secure, and sustainable platform for smart contracts and DApps.
Solana, which is the fifth-largest cryptocurrency by market cap and a high-performance blockchain that boasts over 50,000 transactions per second (TPS), low fees, and interoperability with other blockchains.
Dogecoin, which is the ninth-largest cryptocurrency by market cap and a meme-inspired coin that has gained popularity among retail investors and celebrities such as Elon Musk.

These are just some examples of the many alternatives to Bitcoin that are gaining traction and adoption in the crypto space. These cryptocurrencies are not only competing for market share but also for innovation and development.

While Bitcoin has a loyal fan base and a strong network effect, it also suffers from some limitations and challenges that could hinder its growth potential. Some of these include:

Its slow transaction speed of around 7 TPS, makes it unsuitable for micropayments or high-frequency transactions
Its high transaction fees of around $10 per transaction, which make it expensive for small or frequent transfers
Its limited scalability is due to its fixed block size of 1 MB, which limits its capacity to handle more transactions per second
Its high energy consumption is due to its proof-of-work (PoW) consensus mechanism, which requires a lot of computing power and electricity to secure the network
Its lack of programmability due to its simple scripting language, which limits its ability to support complex functions or applications

These limitations could make Bitcoin less attractive or relevant compared to other cryptocurrencies or technologies that offer better solutions or features. Therefore, I think that Bitcoin will face more competition and pressure from other players in the crypto space and that this will affect its price negatively.

The diminishing returns of the halving effect

A third reason why I think Bitcoin will drop to $29,000 before it can surge to $40,000 is the diminishing returns of the halving effect.

The halving is a process that reduces the reward for mining new blocks of Bitcoin by 50% every four years. This creates a scarcity effect that increases the value of each coin. The halving also coincides with a cyclical pattern of Bitcoin’s price movements, which tend to peak about a year after each halving.

Many experts believe that this will trigger another bull run that could push Bitcoin to new heights. However, I think that this effect will be weaker and less predictable than before.

There are several reasons why I think the halving effect will diminish over time. These include:

The decreasing impact of the reward reduction on the supply and demand of Bitcoin. As the reward gets smaller and smaller, it will have less influence on the inflation rate and the market price of Bitcoin. For instance, the first halving in 2012 reduced the inflation rate from 50% to 25%, while the fourth halving in 2024 will reduce it from 1.8% to 0.9%. This means that the supply shock will be less significant and less noticeable than before.
The increasing difficulty and cost of mining Bitcoin. As the reward gets smaller and smaller, it will become harder and more expensive for miners to break even or make a profit. This could lead to some miners exiting or reducing their operations, which could affect the security and stability of the network. It could also create more selling pressure on the market, as miners need to sell some of their coins to cover their expenses.
The decreasing correlation between the halving and the price cycles of Bitcoin. As Bitcoin matures and becomes more influenced by other factors such as adoption, regulation, innovation, and competition, it will become less dependent on the halving as a price driver. The halving may not be as reliable or accurate as a predictor or indicator of future price movements as before.

Therefore, I think that the halving effect will not be as strong or consistent as before and that it will not be enough to propel Bitcoin to new highs without other positive catalysts or developments.

Conclusion

Of course, these predictions are not guaranteed to come true and should be taken with a grain of salt. Bitcoin is a volatile and unpredictable asset that can be influenced by many factors beyond anyone’s control. Some of the risks and challenges that could affect Bitcoin’s price include:

Regulatory uncertainty and crackdowns from governments and central banks
Cyberattacks and hacks on crypto platforms and users
Technical issues and bugs in the Bitcoin network or software
Competition from other cryptocurrencies and technologies
Market manipulation and fraud by whales and bad actors
Loss of confidence and trust among investors and users

Therefore, anyone who is interested in investing in Bitcoin should do their own research and due diligence before making any decisions. They should also be aware of the potential rewards and risks involved and be prepared for high volatility and price swings.

Bitcoin is a revolutionary and innovative invention that has changed the world of finance and technology. It has also created a new asset class that offers unprecedented opportunities and challenges for investors and users. As Bitcoin enters its second decade of existence, it will continue to evolve and grow, and possibly reach new heights that no one can imagine.

Source: https://in.investing.com/analysis/anndy-lian-bitcoin-price-surges-to-35000-more-gains-ahead-200601620

Anndy Lian

www.anndy.com

j j j

October 30th, 2023

Asian nations more cautious of crypto regulation after Hamas taps digital assets for Israel strike

Kapoor, who was a speaker at one of the G20 committee meetings on cryptocurrency assets, said the statement had not been translated into action. It was time to revisit the declaration and come up with solutions to back it, he said.

Digital-currency wallets that Israeli authorities linked to the PIJ received as much as US$93 million in cryptocurrency between August 2021 and June this year, the WSJ report said, citing analysis by crypto researcher Elliptic.

Wallets connected to Hamas received about US$41 million over a similar time period, the report added, citing research by crypto analytics and software firm BitOK that is based in Tel Aviv.

“Some countries may bring up the narrative that banning cryptocurrencies is the way forward,” said Anndy Lian, Singapore-based author of the book NFT: From Zero to Hero.

“I would argue that banning cryptocurrencies would not stop terrorist financing, but rather drive it underground and make it harder to trace and stop,” he added. “Cryptocurrencies can be traced and tracked, while fiat (currency) such as US dollars cannot.”

Singapore and Hong Kong have regulated cryptocurrency markets, but most of the governments in the region are just beginning to understand the power of cryptocurrencies that could open up new financing opportunities.

However, investors’ faith has been time and again been tested by scandals and collapses of digital exchanges.

Hong Kong’s cryptocurrency sector was recently hit by a JPEX scandal in which more than HK$1.5 billion (US$192 million) went missing, prompting complaints against an ostensibly Hong Kong-based exchange, run by people who have still not been identified.

The revelation about Hamas funding could add to public discomfort, analysts said.

“The disclosure about Hamas could potentially lead to stricter regulations and enhanced scrutiny of crypto transactions in Singapore. It may prompt the MAS to enhance its oversight and enforcement of the crypto sector, as well as to collaborate more closely with other countries to prevent and disrupt terrorist financing through digital assets,” Lian said, referring to Singapore’s central bank.

The Monetary Authority of Singapore (MAS) has been taking measures to regulate the cryptocurrency industry, and has been one of the first to regulate the sector in Asia. Hong Kong has been following Singapore’s lead.

“While the government recognises the economic and social potential of cryptocurrency, it is also cautious about identifying and managing risks involved, such as consumer protection and anti-money-laundering/counter-financing of terrorism,” Lian added.

But cryptocurrencies could easily be tracked down “so this may not be the best way for terrorist organisations”, said Singapore-based Branson Lee, who runs custody solution provider Custodize.com.

“Finally, there are many tools to track and trace these funds. Overall, the crypto industry remains aware of these risks and has done well since to conform to many regulations from FATF (Financial Action Task Force) to jurisdictional compliance,” he said.

Southeast Asia, with nearly 700 million residents, has one of the world’s fastest-growing populations, with some 480 million of them as active internet users.

Consumers in countries like Vietnam and India have been among the fastest worldwide to adapt to cryptocurrencies, but authorities in many other places have not yet found a path to govern the ecosystem effectively.

India does not have any specific cryptocurrency regulations in place, but has been working on introducing legislation.

Earlier this month, local media reported that a probe by Indian police brought to light a case where 3 million rupees (US$36,000) in cryptocurrency was stolen from the digital wallets of a Delhi-based businessman and transferred to the accounts of Hamas.

Manhar Garegret, India head at digital wallet Liminal, highlighted that Hamas had launched campaigns on social media to raise funds through cryptocurrency, but Israel used its technical know-how to block the crypto accounts.

The case of digital theft in Delhi together with the report on Hamas funding showed why each country needed to have standards for cryptocurrency regulation and use technical know-how to integrate into a global standard, Kapoor said.

“Criminals are always one step ahead, but if you reverse-engineer processes, then you can have some solutions,” he said. “Every country is vulnerable to some extent or the other.”

Source: https://emeatribune.com/asian-nations-more-cautious-of-crypto-regulation-after-hamas-taps-digital-assets-for-israel-strike/