Bitcoin, the world’s most popular cryptocurrency, scaled to new heights hitting a new all-time high of nearly $67,000. Bitcoin prices have surged 50% this month, from just under $44,000 at September-end.
The launch of the first exchange-traded fund (ETF) on Tuesday linked to bitcoin attracted huge interest from investors enthusiastic about cryptocurrencies. About 24 million shares of the ProShares BitCoin Strategy ETF were exchanged in a resounding debut day that generated a share price rise of more than 4%.
Paul Tudor Jones, billionaire investor, told CNBC that bitcoin would be a great hedge. “There’s a plan for crypto and clearly it’s winning the race against gold at the moment. I would think that would also be a very good inflation hedge. It would be my preferred one over gold at the moment.”
Despite continued criticism of bitcoin by JP Morgan Chase (JPM) CEO Jamie Dimon, investors are predicting even bigger gains for the popular cryptocurrency. Naeem Aslam, chief market analyst with AvaTrade, said that given the price momentum, bitcoin can easily go all the way to $100,000 by the end of this year. Matt Dibb, COO of Singapore-based Stack Funds, believes its going to go higher – 80 or 90,000 by the end of this year easy, but that won’t be without volatility. “In the past few days, traders were starting to pay high rates to borrow to buy bitcoin futures and that’s a sign that we could be a bit overextended, and there could be a pullback to come.” Dibb anticipates that traders would rotate out of bitcoin and into major altcoins.
Market players point out that the latest wave of buying has been supported by the launch of the first US bitcoin futures-based ETF. However, the ETF doesn’t invest directly in bitcoin. It invests in the futures market tied to bitcoin. What it means is that, the fund will invest in bets on where the digital coin will be priced in the future. The industry regards the ETF as offering a way for a new class of investors to get involved in the cryptocurrency.
Michael Sapir, ProShares CEO, in a news release stated that they believe a multitude of investors have been eagerly awaiting the launch of a bitcoin-linked ETF after years of efforts. “The new ETF will offer a venue to bitcoin to investors with a brokerage account who might otherwise not want to venture into volatile and unregulated terrain.”
Some investors are vying for an ETF that tracks spot prices rather than futures. Jodie Gunzber, managing director, CoinDesk Indexes, said more products are great, but she doesn’t see the point of investing in futures-based bitcoin ETFs when one can buy the asset in spot market. “It’s not like oil or cattle that is impossible to hold physically for most investors. It’s more like gold that can be easily held. Except the cost is more than oil.”