{"id":8458,"date":"2021-10-19T12:52:06","date_gmt":"2021-10-19T12:52:06","guid":{"rendered":"http:\/\/TheNextWeb=1370399"},"modified":"2021-10-19T12:52:06","modified_gmt":"2021-10-19T12:52:06","slug":"whats-an-etf-and-why-is-it-driving-bitcoin-back-to-record-high-prices","status":"publish","type":"post","link":"https:\/\/www.londonchiropracter.com\/?p=8458","title":{"rendered":"What\u2019s an ETF? And why is it driving Bitcoin back to record high\u00a0prices?"},"content":{"rendered":"\n<p>The Bitcoin bulls are racing again. A year ago the cryptocurrency was valued at less than US$12,000. Now it has passed the symbolic milestone of US$60,000, nudging the US$63,255 record it reached in mid-April, before its price fell to as low as US$30,000 in July.<\/p>\n<p>Bitcoin\u2019s rally over the past month is largely <a href=\"https:\/\/www.afr.com\/markets\/currencies\/bitcoin-makes-run-toward-record-high-amid-etf-exuberance-20211016-p590kz\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">attributed<\/a> to speculation the US Securities and Exchange Commission is <a href=\"https:\/\/www.ft.com\/content\/d7601039-e98e-47c8-97af-79f96c2c3d94#comments-anchor\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">poised to approve<\/a> an exchange-traded fund, or ETF, based on Bitcoin futures.<\/p>\n<p>So what is an ETF, and why does this matter to the value of Bitcoin?<\/p>\n<hr>\n<figure class=\"align-center zoomable\"><a href=\"https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip\" rel=\"nofollow noopener noreferrer\" target=\"_blank\"><\/p>\n<figure class=\"post-image post-mediaBleed alignnone\"><img decoding=\"async\" loading=\"lazy\" class=\"alignnone js-lazy\" title=\"https:\/\/creativecommons.org\/licenses\/by-sa\/4.0\/\" src=\"https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip\" sizes=\"(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px\" alt width=\"600\" height=\"307\" data-srcset=\"https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=600&amp;h=307&amp;fit=crop&amp;dpr=1 600w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=600&amp;h=307&amp;fit=crop&amp;dpr=2 1200w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=600&amp;h=307&amp;fit=crop&amp;dpr=3 1800w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;h=386&amp;fit=crop&amp;dpr=1 754w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=754&amp;h=386&amp;fit=crop&amp;dpr=2 1508w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=754&amp;h=386&amp;fit=crop&amp;dpr=3 2262w\"><noscript><img decoding=\"async\" loading=\"lazy\" class=\"alignnone\" title=\"https:\/\/creativecommons.org\/licenses\/by-sa\/4.0\/\" src=\"https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip\" alt width=\"600\" height=\"307\" srcset=\"https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=600&amp;h=307&amp;fit=crop&amp;dpr=1 600w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=600&amp;h=307&amp;fit=crop&amp;dpr=2 1200w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=600&amp;h=307&amp;fit=crop&amp;dpr=3 1800w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;h=386&amp;fit=crop&amp;dpr=1 754w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=30&amp;auto=format&amp;w=754&amp;h=386&amp;fit=crop&amp;dpr=2 1508w, https:\/\/images.theconversation.com\/files\/426873\/original\/file-20211018-26-fxjsuo.png?ixlib=rb-1.1.0&amp;q=15&amp;auto=format&amp;w=754&amp;h=386&amp;fit=crop&amp;dpr=3 2262w\"><\/noscript><\/figure>\n<p><\/a><figcaption><span class=\"caption\"><\/span><\/figcaption><\/figure>\n<hr>\n<h2>How does an ETF work?<\/h2>\n<p>An exchange-traded fund is an investment fund, comprising a pool of assets, traded on a stock exchange. The general attraction is that an ETF offers individual investors the benefits of diversification, protection, and liquidity.<\/p>\n<p>Suppose, for example, you want to invest $100,000 in commercial property. You can\u2019t afford to buy an office building or a shopping center by yourself \u2013 and, even if you could, buying just one building would be putting all your eggs in one basket.<\/p>\n<p>Here\u2019s where a funds manager with an ETF can help. The manager buys a number of office buildings and shopping centers across a range of locations. Suppose these assets cost $100 million. These are \u201cbundled\u201d into a fund with 1,000 units sold for $100,000 each.<\/p>\n<p>It\u2019s like buying a share in a company. It allows you, the investor, to avoid the exposure that comes from buying a single asset. Instead, you get a share of a diversified portfolio.<\/p>\n<p>If the value of the portfolio rises, so does the value of your unit. If you want your money \u2013 to liquidate your asset by selling it \u2013 this is easy to do because the fund\u2019s units are traded on an exchange.<\/p>\n<p>An ETF is also regulated. This protects you from some of the risks (such as fraud) that come from buying assets directly.<\/p>\n<h2>How funds are managed<\/h2>\n<p>Rather than physical assets (as in our example), many ETFs hold securities such as stocks and bonds or derivatives. These funds can be either passively or actively managed.<\/p>\n<p>Passively managed funds, which are the most prevalent, hold a basket of assets that track the market, or a market segment. An \u201cindex fund\u201d, for example, holds shares in proportion to their weight in a stock market index such as the <a href=\"https:\/\/www.spglobal.com\/spdji\/en\/indices\/equity\/sp-500\/#overview\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Standard &amp; Poor\u2019s 500 Index<\/a>. If a company makes up 5% of the index\u2019s value, the manager will ensure its share makes up 5% of the fund.<\/p>\n<p>Actively managed funds, by contrast, hold more shares whose price the fund manager expects to rise strongly, and fewer or no shares they expect to perform poorly. Whether the return on these funds exceeds those delivered by passive funds depends on whether the fund managers\u2019 judgment (or luck) is better than that of the market as a whole.<\/p>\n<h2>What has this got to do with Bitcoin?<\/h2>\n<p>A Bitcoin-based ETF is seen as something that will entice more investors to gamble on cryptocurrency.<\/p>\n<p>Buying Bitcoin or other cryptocurrencies directly can be fraught. Forget your private key (the equivalent of a password or PIN) and you lose <a href=\"https:\/\/www.nytimes.com\/2021\/01\/12\/technology\/bitcoin-passwords-wallets-fortunes.html\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">it all<\/a>. There is no friendly local bank manager who can retrieve or reset a password or make good your loss.<\/p>\n<p>Scams are also on the rise. In the US alone, more than <a href=\"https:\/\/www.forbes.com\/sites\/simonconstable\/2021\/06\/29\/us-saw-more-than-80000-cryptocurrency-frauds-in-2020-report\/?sh=20aeb4a76f0b\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">81,000 cases of fraud<\/a> were reported in 2020.<\/p>\n<p>So bundling up cryptocurrencies into products overseen by traditional funds managers and regulators can be seen to have advantages, bringing greater respectability to cryptocurrency trading. (So long as you aren\u2019t bothered by that being the antithesis of the decentralized and distributed ideals that drove techno-libertarians to create cryptocurrencies in the first place.)<\/p>\n<h2>Beware another bubble<\/h2>\n<p>But while investing in cryptocurrencies through an ETF brings a number of safeguards, it does not reduce the market risk. An indirect gamble is still a gamble.<\/p>\n<p>Indeed an <a href=\"https:\/\/www.coindesk.com\/markets\/2021\/10\/11\/dying-for-a-bitcoin-futures-etf-watch-out-for-contango-bleed\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">ETF of Bitcoin futures<\/a> isn\u2019t even indirect ownership of a pool of bitcoins. It\u2019s a pool of contracts about bets on the future price of the cryptocurrency.<\/p>\n<p>If this sounds a bit like the complicated derivatives known as collateralized debt obligations that led to the Global Financial Crisis in 2008, you\u2019d be right. The more complex the financial instruments become, the more dangerous they may be.<\/p>\n<p>One of the few who predicted the collapse of that market was hedge fund manager Michael Burry (portrayed by Christian Bale in the 2015 movie <a href=\"https:\/\/www.imdb.com\/title\/tt1596363\/\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">The Big Short<\/a>). Last week <a href=\"https:\/\/www.cnbc.com\/2021\/10\/15\/michael-burry-of-the-big-short-asked-about-shorting-crypto-days-before-bitcoin-hit-60000.html\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">he effectively warned<\/a> that cryptocurrencies are a speculative bubble. This is a view shared by most <a href=\"https:\/\/au.finance.yahoo.com\/news\/good-drug-dealers-nobel-prize-winners-snub-bitcoin-184903784.html\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">economists<\/a> and <a href=\"https:\/\/www.scmp.com\/tech\/enterprises\/article\/2146648\/theres-bitcoin-bubble-says-alibaba-executive-chairman-jack-ma\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">business leaders<\/a>.<\/p>\n<p>As with all bubbles, some will make fortunes, but many will lose. Take care.<!-- Below is The Conversation's page counter tag. Please DO NOT REMOVE. --><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/counter.theconversation.com\/content\/170095\/count.gif?distributor=republish-lightbox-basic\" alt=\"The Conversation\" width=\"1\" height=\"1\" class=\"js-lazy\"><!-- End of code. If you don't see any code above, please get new code from the Advanced tab after you click the republish button. The page counter does not collect any personal data. More info: https:\/\/theconversation.com\/republishing-guidelines --><\/p>\n<p><noscript><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/counter.theconversation.com\/content\/170095\/count.gif?distributor=republish-lightbox-basic\" alt=\"The Conversation\" width=\"1\" height=\"1\" class><\/noscript><\/p>\n<p><em>This article by <a href=\"https:\/\/theconversation.com\/profiles\/john-hawkins-746285\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">John Hawkins<\/a>, Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, <a href=\"https:\/\/theconversation.com\/institutions\/university-of-canberra-865\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">University of Canberra, <\/a>is republished from <a href=\"https:\/\/theconversation.com\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">The Conversation<\/a> under a Creative Commons license. Read the <a href=\"https:\/\/theconversation.com\/what-is-an-etf-and-why-is-it-driving-bitcoin-back-to-record-high-prices-170095\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">original article<\/a>.<\/em><\/p>\n<p> <a href=\"https:\/\/thenextweb.com\/news\/what-is-etf-bitcoin-price-increase-syndication\">Source<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Bitcoin bulls are racing again. A year ago the cryptocurrency was valued at less than US$12,000. Now it has passed the symbolic milestone of US$60,000, nudging the US$63,255 record it reached&#8230;<\/p>\n","protected":false},"author":1,"featured_media":8459,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/posts\/8458"}],"collection":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8458"}],"version-history":[{"count":0,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/posts\/8458\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=\/wp\/v2\/media\/8459"}],"wp:attachment":[{"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8458"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8458"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.londonchiropracter.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8458"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}