Hey all, Hump Days is a day late. Yes, I know, sorry! Better late than never.
The new ProShares Bitcoin ETF is set to debut tomorrow. However, it actually doesn't let investors own Bitcoin directly, since it’s a “Futures ETF”. A Futures contract is a type of financial instrument used to bet on the future prices of things, hence the name, ‘futures’. It's used commonly in commodities trading and is an agreement to buy or sell something at a specified time in the future. So that means the Bitcoin Futures ETF doesn't actually buy or hold any Bitcoin. Instead, it has a loose correlation on the price of the Bitcoin.
Thus it is my opinion that it won't impact the price of Bitcoin as much as people think. That is unless, the media hypes it up like crazy.
We'll also be able to tell how its doing in the first day of trading as well as how many assets pour into it after a month or so.
In a Bloomberg piece by Matt Levine (someone way smarter than I am) here’s exactly how the Bitcoin ETF will work:
The Bitcoin ETF will put about 30% of the money into a collateral account at a U.S. registered commodity futures exchange, to collateralize positions in cash-settled Bitcoin futures.
It will put about 70% of the money into money-market securities, Treasury bills or high-grade commercial paper or whatever.
The ETF isn’t trading Bitcoin, it’s trading a type of synthetic Bitcoin, which is a service offered up by arbitragers and middlemen. Compare that to a normal S&P 500 ETF where if you put $1000 into it, that fund takes your $1000 and you get a percentage of Apple, a percentage of Tesla, Google, Microsoft, etc all the way down the line for the 500ish stocks in the S&P 500. It actually buys the underlying stock.
In other news, I bought some jpegs on NFT sites this past week, and one of my favorites is this new NFT project called “MutantCats”. Probably a huge waste of money though.
Have a great week :)
Humphrey
In the Markets
Weekly News Roundup
Fed says it could begin “gradual tapering process” by mid-November (CNBC)
According to minutes from the September meeting, the Federal Reserve could begin reducing the pace of its monthly asset purchases as soon as mid-November thus drastically reducing the help they’ve been providing to the economy.
SEC Set to Allow Bitcoin Futures ETFs as Deadline Looms (BBG)
In a monumental moment for the cryptocurrency industry, the SEC is poised to allow the first U.S. Bitcoin future ETF to begin trading as early as this month.
U.S. Initial Jobless Claims Drop to Lowest Since March 2020 (BBG)
Applications for U.S. state unemployment benefits fell to the lowest since March 2020 which signals that employers are hanging onto their workers as claims have declined while the economy recovers.