What The First Bitcoin ETF on the NY Stock Exchange Means for DeFi
The hotly anticipated Bitcoin ETF on the NY stock exchange boosted the coin’s prices to an all-time high last night. The world’s largest cryptocurrency rose by 3.9% to $66,398.25 by 4 p.m. ET, according to Coin Metrics. Ethereum and Solana followed suit with a rise of 10% over the last 24 hours.
In total, the overall crypto market cap has climbed above its previous record high, reaching $2.6 trillion at the time of writing.
But note that this isn’t the first Bitcoin ETF overall, rather the first in the US. In Europe, the XBT Bitcoin Tracker launched six years ago in 2015 on Nasdaq’s Nordic exchange and there has also since been a Canadian Bitcoin ETF.
Predicted golden months for DeFi
Many renowned crypto analysts believe that thanks to the ETF (under the ticker Bito), Bitcoin is now entering the second major leg of a run that will take it above $100,000 before the end of 2021. Tom Lee at Fundstrat has predicted that first-year inflows could exceed $50 billion with the Bitcoin price being driven up to $168,000. The SEC hasn’t yet officially approved Bitcoin futures ETFs, which track the price of futures contracts, but things are looking positive here, which is particularly exciting as it has been pushing back on it for years.
Worldwide, the ETF has been extremely well received, with high profile business figures and investors voicing their excitement. Twitter CEO Jack Dorsey, who is a long time fan and investor in crypto, tweeted a moon emoji in the moment in which Bitcoin hit its peak.
How will the Bitcoin ETF work?
As defined by Investopedia, an ETF, or an exchange-traded fund is an investment vehicle that tracks the performance of a particular asset or group of assets. ETFs allow investors to diversify their investments without actually owning the assets themselves.
A Bitcoin EFT arguably brings together the best elements of two popular investments, namely the usefulness of a traditional EFT and access to the world’s most popular cryptocurrency.
In practice, it will operate very similarly to other EFTs. The only difference will be that rather than tracking market exchanges, it will track Bitcoin costs.
Why is the Bitcoin ETF useful for investors?
In a nutshell, the Bitcoin ETF would make investing in the cryptocurrency easier and more accessible. It could also help to solve some of the security issues that currently plague Bitcoin. Historically, there have been instances of investors being blocked from accessing their Bitcoin due to forgotten passwords. In fact, research from Chainalysis revealed that about 18% percent of Bitcoin may be lost or stuck in inaccessible wallets.
Nigel Frith, a leading analyst at Bitcoinmoney.net stresses that the ETF will be a less risky way for investors to jump on board with Bitcoin: “It offers exposure to Bitcoin while avoiding the risks of hacking and unregulated exchanges altogether. It is a great next step for mass adoption of cryptocurrency.”
An added benefit is that ETFs can be traded directly from investors’ existing brokerage accounts.
It’s a great time to get involved in DeFi!
There’s arguably never been a better time to jump onto the DeFi bandwagon, whether it's a cryptocurrency exchange platform, an NFT marketplace or a completely new blockchain protocol, and if you’re wondering whether your company needs blockchain, here are some factors that might help you decide.