Myth Of Money: WTF is a Bitcoin ETF?
Welcome to this week’s edition of the Myth of Money, a weekly newsletter on all things money, economics and technology read by 10,000+ investors, curated by Tatiana Koffman.
Disclaimer: The following is not intended as investment advice. Do your own research.
There has been a lot of talk about a potential Bitcoin ETF and what this may mean for Bitcoin’s price. Before I share my thoughts, let’s cover the basics?
Whats is an ETF?
ETF stands for “Exchange Traded Fund” which can invest in a variety of assets, charge a small fee (usually 2%) and provide investors with an allocation instrument into a specific asset class such as oil, energy and innovation stocks.
Bitcoin proponents have been lobbying for a Bitcoin ETF for some time with significant resistance from U.S. regulators. Notably, Canadian regulators recently approved a Bitcoin ETF, trading under the ticker $BTCC.
Bitcoin ETFs are a great tool for traditional investors to gain exposure to the asset class through their brokerages, without having to set up separate crypto exchange accounts and worrying about custody. Consequently, a U.S.-based Bitcoin ETF will lend additionally legitimacy to the rising asset and increase inflows, thus increasing the price.
Recently, the U.S. government agreed to review the VanEck Bitcoin ETF application, giving it 45 days to respond (starting March 15).
What about Bitcoin Trusts?
There are a few options to invest in Bitcoin on the public markets already, namely Bitcoin trusts like Grayscale. The problem with these trusts is that they don’t often reflect the underlying asset price. For example, you could buy $GBTC at an 18% premium, and it could trade at a -10% discount in the future, significantly eating away at your profits from the underlying asset price.
ETFs have a long history of supporting an increase in the underlying asset price. For example, when Cathie Wood’s ARK invest announced its space exploration ETF, the price of Virgin Galactica jumped 30%+ in one day.
But Isn’t the Market Already at the Top?
Technical experts seem to disagree. A popular thought leader and trader who goes by the monicker of Plan B, argues that the numbers say we are still early.
What About Regulators? Can They Ban Bitcoin?
Former financial regulator Brian Brooks reiterated this week that governments can fight change, but at the end of the day, if enough people want something, governments will have to adapt. We saw this with the legalization of Uber, AirBnb, and even Marijuana. And with 1 million active Bitcoin wallets each day, people clearly want access to cryptocurrencies.
And now for a little comic relief…
This Week By the Numbers 📈
Consumer spending fell 1% last month, the biggest drop since last April, but is expected to pick back up in March due to government stimulus. The Dow and the S&P continues to rise as investors rotate capital out of tech stocks into other sectors, recovering from COVID.
Bitcoin saw heavy volatility this week before making a swift recovery into the high $50k range.
Top Stories 🗞
Dalio on Bitcoin: ‘Good Probability’ It Will ‘Outlawed’ by US Gov
Ray Dalio, founder of the $150 billion hedge fund Bridgewater Associates, believes bitcoin has “proven itself” in the last 10 years but still sees a “good probability” that it will be outlawed by governments. The billionaire investor said it was “very likely under a certain set of circumstances” that bitcoin would be “outlawed” as gold was in the 1930s. Under the U.S. Gold Reserve Act of 1934, it became illegal for individuals to own gold because, according to Dalio, governments did not want gold to compete with money or credit as a store of value. “Every country treasures its monopoly on controlling the supply and demand. They don’t want other monies to be operating or competing, because things can get out of control,” Dalio added, citing India’s proposed ban on crypto as an example. Read Full Story.
Crypto Is Banned in Morocco, but Bitcoin Purchases Are Soaring
Cryptocurrencies are banned in Morocco, but peer-to-peer bitcoin trading platform LocalBitcoins is reporting all-time trading highs this year. February 2021 was the platform’s “best month ever” in Morocco in terms of trading volumes. Approximately $900,000 worth of bitcoin was traded on the platform through the month. LocalBitcoins also saw a 30% increase in user registrations between 2019 and 2020, with over 700 new accounts created. Financial regulators continue to view cryptocurrencies with skepticism, even as the US central bank investigates the benefits of a government-issued national digital currency (CBDC). Read Full Story.
Serena Williams Backs $5M Round in Bitcoin Rewards Startup Lolli
Bitcoin rewards company Lolli has raised $5 million from a cast of notable investors. Announced Wednesday, Lolli’s pre-Series A round features Serena Williams’ Serena Ventures, her husband Alexis Ohanian’s Seven Seven Six and Night Media, the management company that represents YouTuber MrBeast. Other investors from the influencer ranks include Casey Neistat, Phil DeFranco, Cody Ko, Noel Miller, Ian Borthwick and Gabriel Leydon. Read Full Story.
TIME Magazine to auction 3 covers as NFTs; eyes crypto payments for subscriptions
As cryptocurrencies and non-fungible tokens (NFTs) continue to explode in interest and value, TIME has designed its first-ever cover exclusively as an NFT, featuring the bold title "Is Fiat Dead?" It's a nod to one of its most iconic cover designs from the April 8, 1966 "Is God Dead?" and April 3, 2017 "Is Truth Dead?" editions — and an acknowledgement of the rise of digital currency as an asset class. All three covers will be auctioned on SuperRare, a marketplace for digital artworks tokenized as crypto-collectible digital items to be owned and traded. TIME, which Salesforce (CRM) CEO Marc Benioff and his wife Lynne purchased in 2018, currently does about seven-figures a year in its cover store, where its magazine covers can be bought as canvas prints, posters, and more. Read Full Story.
VIP Investor List 💰
I will start sending out occasional investment opportunities to those on my VIP investor list. Some of these will be fund investments, start-up investments, pre-IPO deals, crypto and digital assets opportunities, exclusive allocations… you get it. If you are an accredited investor and want to be on this list, send me a note.
Favorite Products 👀
Lolli.com - Earn Bitcoin while you shop at thousands of online retailers. [U.S. only]
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital and Cryptocurrencies. I believe in empowerment through closing the financial education gap and creating equality of opportunity for the next generation. Check out my articles in Forbes here.
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