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Bitcoin and the entire cryptocurrency industry experienced a significant bearish trend in 2018. The bears seem to have crossed over into 2019 and they are still ruling the markets. Since its inception, Bitcoin, the largest digital currency by market capitalization, was meant to become a store of value. However, its volatile nature has turned it into a speculative investment.
The price of bitcoin has slid by around 80% from its December 2017 highs leading to some investors losing considerable amounts. Introduction of Bitcoin ETF ( exchange-traded fund, a marketable security that tracks a stock index, a commodity, bonds, or a basket of assets) is meant to stabilize the price of BTC, in turn, making it a viable investment with fewer risks. According to digital asset strategist and director at VanEck, Gabor Gurbacs, hard work by all the involved teams is necessary to serve the public interest.
Benefits of a Bitcoin ETF
Although BZX withdrew the proposed rule change (SR-CboeBZX-2018-040), on January 22, 2019, the Cboe BZX Exchange, Inc. submitted VanEck SolidX Bitcoin ETF Proposed Rule-change on January 30, 2019. These partial amendments mean that the crypto regulators are working hand-in-hand with the stakeholders to come up with the best infrastructure to cater to everybody’s needs.
A Bitcoin ETF, once introduced correctly will serve the interest of the public through various ways. According to Gurbacs, it will increase liquidity whenever traders start using the ETF ecosystem. That will balance demand and supply enabling the digital currency to trade within its actual price range. Hence, volatility will become limited making BTC gain status as a store of value rather than a speculative investment.
I believe, a #Bitcoin #ETF serves the public interest via:
+ Increased liquidity using the ETF ecosystem
+ Lower counter-party risk
+ Better valuation & execution practices
+ Separation of duties: trading, custody, valuation
+ Transparent fees
+ Established compliance framework pic.twitter.com/OB0XUZeJ1O
— Gabor Gurbacs (@gaborgurbacs) February 3, 2019
The ETF will lower counter-party risk via Commodity-Based Trust Shares. The shares of the Trust are referred to as the “Shares.” Each of these Shares will represent a partial undivided beneficial interest in the Trust’s net assets. Thus, regulators will have comprehensive surveillance of the markets which will minimize the risks involved in trading and investing in bitcoin and other cryptocurrencies.
When stability is introduced in any market, better valuation and execution practices are achieved. These benefits will translate into a stable bitcoin price enabling it to transform into a dependable store of value in the future.
The Bitcoin ETF will ensure that there is a clear separation of duties including valuation, custody, and trading. Thus, there will be minimized collisions in all the bitcoin transactions which will enhance efficiency. All fees will be made transparent in an established compliance framework.
Hence, investors and the general public can determine the origin of all fees charged in every transaction.