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BITQ — a new and cheap ETF

Commodities were once considered the most volatile asset class. However, the appearance of cryptocurrencies, which quickly gained popularity, pushed them into the background.

Rising prices and wild volatility act like a magnet for investors and traders. The opportunity to make a fortune from a small capital is a powerful motivator. I have been working in the financial markets for more than four decades, and during all this time I have never observed such dynamics as bitcoin demonstrates.

In 2010, BTC was trading at five cents per token. On April 14, 2021, the price peaked at $65,500. Few people could imagine that out of 10 dollars invested in 2010, 13.1 million could be made. And although bitcoin has halved since its peak on April 14, it remains an attractive and extremely volatile asset.

On April 14, the “bearish” phase of the cycle began

On April 14, the June CME bitcoin futures peaked at $66,450 (which coincided with the listing of Coinbase Global (COIN) on NASDAQ). This peak was similar to the high of the end of 2017 at 20,000, which was recorded after the launch of CME futures on cryptocurrency.

However, in mid-April, BTC began to rapidly become cheaper amid concerns about its “carbon footprint” and pressure from China, which is introducing its own digital yuan.

As can be seen from the chart, on May 19, bitcoin futures fell to $30,275. Since then, the June contract has formed rising lows at $30,915 on June 8 and $31,715 on June 21. Trading at $32,500 on June 21, bitcoin was closer to recent lows than highs, while the leading cryptocurrency remains in a “bearish” trend.

Consolidation or preparation for a new collapse?

Time will tell whether BTC will continue to consolidate in the range of 30,000 – 42,500 dollars (the same applies to other digital currencies, of which there are more than 10,500).

The price is within reach of the low of May 19, and the potential for further falls remains high. In general, cryptocurrencies themselves leave few people indifferent.

Their “adherents” believe that bitcoin will grow to $ 100,000 or more. Opponents, in turn, expect a complete depreciation. Charlie Munger (Warren Buffett’s partner) recently called bitcoin and other cryptocurrencies “disgusting and contrary to the interests of civilization.” In the past, Mr. Buffett himself has characterized the currency as “rat poison squared.”

The only thing that supporters and opponents agree on is that in the coming weeks and months the trading range will be incredibly wide.

The Bitwise Crypto Industry Innovators ETF (NYSE:BITQ) is based on the Bitwise Crypto Innovators 30 index, reflecting the dynamics of companies leading the “rapidly developing crypto economy”.

The fund’s portfolio includes 31 assets, the three largest of which are MicroStrategy (NASDAQ:MSTR), Coinbase (NASDAQ:COIN) and Marathon Digital Holdings (NASDAQ:MARA). BITQ manages assets worth $51.264 million, daily turnover averages 115,851 shares, and the deposit management fee is 0.85%.

The ETF debuted as recently as May 12, almost a month after bitcoin reached its peak, and Coinbase appeared on the scene thanks to a listing on NASDAQ.

BITQ and its correlation with Bitcoin

Despite the fact that BITQ does not directly reflect the dynamics of BTC, it is moving in the same direction as the currency. On May 12, June BTC futures were trading at $58,340, and by May 19, it had dropped 48.1% (to $30,275).

Over the same period, BITQ fell by 22.2% (from $25.13 to $19.56). As of June 21, BTC was trading 7.3% above its low, while BITQ was about 12.5% above the recent bottom level.

Yes, BITQ does not follow bitcoin tick by tick, but the ETF correlates with the leading cryptocurrency and can be an adequate investment option for those who want to use an exchange product to trade in the direction of bitcoin.

The market is Still waiting for the launch of cryptocurrency ETFs

BITQ is a good alternative, but the launch of a reliable bitcoin-based ETF, which will solve the problem of storage and liquidity, will strengthen the degree of recognition of the cryptocurrency. However, the U.S. Securities and Exchange Commission (SEC) is in no hurry to authorize such initiatives for various reasons.

A lot now depends on SEC Chairman Gary Gensler, a financial technology expert. He taught a course on this subject at the Massachusetts Institute of Technology after he left the post of chairman of the CFTC, which he held during the Obama administration.

In addition to the unfair use of cryptocurrencies, which many opponents of this asset class talk about, the possibility of price manipulation remains a serious problem. In addition, governments are in no hurry to give up control over the money supply.

The more actively bitcoin and other cryptocurrencies replace traditional fiat money as an exchange tool, the more they threaten state power, which stems, among other things, from control over each wallet.

Until a real bitcoin-based ETF appears on the scene, BITQ will look like a reasonable alternative.