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What The Future(s) Holds For Bitcoin?

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Bitcoin, the lead cryptocurrency, continues to surge ahead, aiming for a fresh all-time high that will surpass the current record high of $64,863.10 touched in April. The euphoria surrounding the U.S. Securities and Exchange Commission's greenlighting for a Bitcoin Futures ETF and its anticipated listing any time soon has resulted in Bitcoin moving up by a whopping 40 percent till date in this month.

Last week, the Securities and Exchange Commission (SEC) allowed Bitcoin Futures ETFs in a first for the industry. Bitcoin Strategy ETF by Maryland-based ProShares, may be the first to launch next week.

What is an ETF? What is special about Bitcoin ETF? Are Bitcoin ETFs spot-based or futures-based? Will the Bitcoin Futures price match the Bitcoin price? Before delving into these, let us do a quick round-up of the latest cryptocurrency market trends.

Market leader Bitcoin (BTC) is currently trading at $60,982.60 with a market capitalization of $1.1 trillion implying market dominance of close to 47 percent. It is currently only 6 percent lower than its all-time high of $64,863.10 touched in April. At current prices, around 96 percent Bitcoin holders are in the money.

Alternate coins too have been able to partake in the Bitcoin driven crypto rally. Bitcoin's closest rival Ethereum (ETH) is currently trading at $3,737.06, with a market capitalization of $0.4 trillion indicating a market dominance of 18 percent. At current prices, 96 percent Ethereum holders are in the money.

Market capitalization of all cryptocurrencies have increased by around 28 percent month-do-date, to $2.4 trillion from $1.9 trillion at the end of September 2021.

In terms of aggregate market capitalization as per coinmarketcap.com, the top 15 coins as of this writing are Bitcoin (BTC), Ethereum (ETH), Binance Coin (BNB), Cardano (ADA), XRP (XRP), Solana (SOL), Polkadot (DOT), Dogecoin (DOGE), Terra (LUNA), Litecoin (LTC), Avalanche (AVAX), Bitcoin Cash (BCH), Algorand (ALGO), Polygon (MATIC), and Stellar (XLM).

Compared to our previous review, Litecoin (LTC) with weekly gains of half a percent advanced to rank 10, pushing Avalanche (AVAX) that had shed 5.3 percent in a week, to rank 11.

Likewise, Polygon (MATIC) that gained 18 percent in a week, advanced to rank 14, relegating Stellar (XLM) to rank 15 despite its weekly gain of 9 percent.

Down the coins hierarchy, maximum weekly price momentum was spotted in the 83rd ranked Syscoin (SYS) that gained 42 percent, 70th ranked Reef (REEF) that spiked 38 percent and 74th ranked NKN(NKN) that gained 35 percent.

The top 5 stablecoin tokens ranked according to market capitalization continue to be Tether (USDT), USD Coin (USDC), Binance USD (BUSD), Dai (DAI), and TerraUSD (USDT).

Top tokens (excluding the stablecoins mentioned above) based on market capitalization now are Uniswap (UNI), Wrapped Bitcoin (WBTC), Chainlink (LINK), SHIBA INU (SHIB) and Axie Infinity (AXS). Wrapped Bitcoin (WBTC) has moved ahead in rankings by one notch, aided by its weekly price-gain of more than 7 percent.

The prospect of a Bitcoin Futures ETF, being available for the masses soon, warrants a clearer understanding of the new product and how it offers the flavor of a digital world asset through the familiarity of a conventional investment product.

What is an ETF?

An exchange traded fund (ETF) is an investment vehicle or security that tracks the performance of a particular asset or group of assets for e.g., any sector, index, commodity, or even another other asset.

ETFs are marketable securities, which means that these have an associated price and can be purchased or sold on a stock exchange akin to how a regular stock is purchased. The price of an ETF's shares will change throughout the trading day as the shares are bought and sold on the market.

ETFs allow investors to diversify their investment holdings without actually owning the asset itself.

As an ETF is an investment vehicle, investors may be able to short-sell the shares of the ETF if the expectation is that the price of the underlying would go down in the future. Short selling is used both for speculation as well as for offsetting or hedging a similar long position.

What is a Blockchain ETF?

Blockchain ETFs primarily track the stock market prices of companies that have invested in blockchain technology. Likewise, there are also dedicated ETFs that invest in stocks of companies that are pure-play crypto companies or companies that hold a majority of their net assets in bitcoin or those that make a majority of their profits through mining or building mining equipment. These ETFs do not hold any cryptocurrencies directly.

What is a Bitcoin ETF?

A Bitcoin ETF is an Exchange Traded Fund that would mimic the price of the digital currency. Investors can buy into the ETF without trading Bitcoin itself. Investing in a Bitcoin ETF can remove complex storage and security procedures that would be required if investors were to invest in the cryptocurrency directly.

What is Bitcoin Futures ETF?

Bitcoin Futures ETF is a fund that seeks to provide capital appreciation primarily through managed exposure to cash-settled Bitcoin futures contracts. The fund would not invest in, or seek direct exposure to, the current "spot" or cash price of Bitcoin.

Events impacting the price of Bitcoin across all Bitcoin trading venues could impact the price and market for Bitcoin futures. A number of factors, like demand and supply of Bitcoin futures contracts, market conditions, expectations, position limits, collateral requirements etc would also play out to determine how closely the Bitcoin "futures" price would trade relative to the "spot" price of Bitcoin. In short, the performance of Bitcoin futures contracts and therefore the performance of the fund may not exactly match the performance of Bitcoin.

What is Bitcoin Spot ETF?

Bitcoin Spot ETFs, if approved, could represent investments that are backed by Bitcoins, and not derivatives tied to it.

As the crypto-based investment horizon widens, both directly and indirectly through derivative investment products, cryptos are being further pushed into the financial mainstream. The SEC's greenlighting of ETFs undoubtedly provides a stamp of legitimacy to the nascent crypto asset class. Cryptoworld is indeed excited as can be seen in the surge in prices and market capitalization.

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