Bitcoin ETF = $50,000 bitcoin?
In a recent CNBC appearance, Arthur Hayes, CEO and co-founder of the BitMEX cryptocurrency exchange said that bitcoin (BTC-USD) could rise as high as $50,000 by the end of 2018.
As Hayes put it, "We're one positive regulatory decision away, maybe an ETF approved by the SEC, to climbing through $20,000 and even to $50,000 by the end of the year."
Why aren't there any bitcoin ETFs yet?
The short answer is because the SEC hasn't approved any. Several companies have tried to launch them -- from leveraged ETFs to inverse ETFs to just plain-and-simple ETFs that own bitcoins (BTC-USD) and track the digital currency's price. To make a long story short, the agency doesn't feel as if any proposed bitcoin ETFs have met its standards.
Here's why a bitcoin ETF could be a game-changer
There are a few reasons a bitcoin ETF (or several) could be a big deal for the digital currency. Just to name a few:
For starters, many people aren't comfortable with buying bitcoin directly. To be sure, the process of buying bitcoin has become much easier over the past year or so, especially with mainstream financial companies like Square getting into the bitcoin business. However, the reality is that many Americans simply don't understand the technology and have no desire to hold bitcoins in a digital wallet. So, a bitcoin ETF could bring a whole new demographic into the market.
Furthermore, security is a big concern among many would-be investors. There have been several high-profile cryptocurrency hacking incidents, and it's fair to say that the thought of having bitcoin stolen is an obstacle for some people when it comes to holding large sums of the digital currency. A bitcoin ETF would be responsible for the security of the bitcoin it owned, and would be able to employ the most effective techniques to keep it safe.
There certainly are alternatives to owning actual bitcoin, but they really aren't great. Vehicles such as the Bitcoin Investment Trust allow investors to own bitcoin indirectly, but at a huge premium. There are bitcoin futures, but these are relatively short-dated and require a substantial amount of capital.
Finally, a bitcoin ETF would add tremendous legitimacy to bitcoin as an investable asset, especially in the eyes of institutional investors. The main reason behind bitcoin's amazing rally in 2017 was a surge in investor interest, and it's conceivable that a bitcoin ETF hitting the market could create a similar surge in demand.
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