Can Bitcoin ETF Skyrocket the Market Like It Did For Gold?

  • Darryn Pollock
    ⭐ Features

    Bitcoin’s latest surge could be in preparation for ETF which, in the gold market, played a huge role in upping its price. Can Bitcoin replicate this?

Can Bitcoin ETF Skyrocket the Market Like It Did For Gold?
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Gold has always been a steady and reliable asset, but it has also been one that is ever evolving and growing. There have been changes in the gold investment game that have helped it along the way, and one of the bigger ones has been ETFs.

An ETF is a kind of investment fund where the price of assets like gold, stocks and oil can be tracked. These assets can then be traded on exchanges, just like conventional stocks.

These have been lacking from Bitcoin as regulators believe it is too unstable and volatile as an asset, but that is starting to change.

So, if we look at the graphs of Bitcoin and Gold over a period before the introduction of ETFs, and then after in the case of the precious metal, there are some clear and obvious similarities.

A matching graph

A matching graph

Gold’s growth in value has seen a few big changes, one of those being in the 1980s when Richard Nixon unsealed the US Dollars from gold, and that increased its worth as a result of demand and supply. Gold increased from $20 to $30 an ounce to about $600.

Then in 2003, the gold-backed ETF was introduced into the market by the Rothschilds and the Deutsche Bank; and this skyrocketed the price of gold to $1,300 an ounce, which is a 300 percent increase.

Bitcoin, who's price graph matches Gold’s in a manner which is slightly eerie, is now very much on the brink of its ETF moment.

The president of CBOE, a company that also has Bitcoin futures markets out there, has been trying to persuade the SEC to allow for ETFs to come to fruition. This follows from the first ever application in 2014, when the Winklevoss twins made the first formal proposal. Three full years later, the SEC finally got around to reviewing the proposed ETF - and rejected it.

But with the growth of Bitcoin recently into a much more stable and mass accepted product, it is getting harder and harder for the SEC to deny this moves. The SEC has spoken positively about Bitcoin before and could well be warming up to it.

Take over the gold market

There is also a belief that Bitcoin could start to outshine gold as an asset should it reach its ETF level. Gabor Gurbacs, director of digital asset strategies at VanEck/MVIS, says the following:

“Gold today has around $7 tln outstanding. If you take, say, five to 10 percent, I’ll let everyone do the math, Bitcoin has upside,” he explained. “Bitcoin is used as digital gold today. It’s a de-ri, if someone wants to outlay systematic risk, then one would go to access gold or digital gold (Bitcoin).”

It is interesting times for Bitcoin with positive rushing back to the market. If it was too suddenly pick up a major institutionalized coup like an ETF, it could well be a game changer.

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Question of the Day: Can Stablecoins Accelerate Cryptocurrency Adoption?

  • Yuri Molchan
    ⭐ Features

    Stablecoins show hardly any volatility compared to Bitcoin and altcoins, many are hoping that they will be able to bridge new crypto economy and regular fiat money

Question of the Day: Can Stablecoins Accelerate Cryptocurrency Adoption?
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Bitcoin, the father cryptocurrency, emerged in hope that it will remove all intermediaries in electronic commerce that cut off their share of payments. BTC was perceived as a P2P way to replace fiat cash in an electronic format, which would enable one party to pay another without any financial institution or payment platform which would demand its share of a transaction as a reward for its services.

What is wrong with Bitcoin

For quite a while Bitcoin was performing the way the crypto community expected. But the situation changed later – BTC rate became weaker, thus bringing down its financial and economic reliability, when it gets to be used as a regular means of payment.

You cannot have a currency that would cost like a British castle today, a gram of gold – tomorrow and a pack of French fries the day after.

At that point practical fintech minds came up with an idea of creating something which would become a breakthrough in the universe of crypto – a so-called stablecoin.

Will stablecoins solve the volatility problem?

Technically, stablecoins are protected from the volatility roller-coaster that Bitcoin and other cryptos love to ride. They are programmed to keep their prices stable and investors now are largely attracted to this new type of digital assets.

Stablecoin does not show any volatility in its monetary value, since it has a fixed connection to an asset it is pegged to. The major goal of using stablecoins is taking the best from decentralized crypto coins and combining it with a constant value. Thanks to it, stablecoins can be used as a reliable means of trade.

Asset-pegged stablecoins

Asset-backed ones get their value from an asset as can be understood from the name. An asset provides the necessary value to a coin, as well as the necessary legitimacy.

A great example of an asset-pegged stablecoin is Tether (USDT). In spite of a series of scandals at the end of last year, it remains the most popular stablecoin in the crypto market.

Recently, it has partnered with the Tron Foundation to launch a Tron-based stablecoin.

Other examples are TrueUSD (TUSD), USD Coin (USDC), the Gemini Dollar (GUSD), and the Paxos Standard (PAX). They are all pegged to the USD.

Crypto-backed stablecoins

Some digital coins work in a similar way to fiat-backed ones, however, they are pegged to collateral crypto. That means that crypto assets that ensure the value of such stablecoins are stored in a wallet similar to escrow.

A good example of a crypto-pegged token is Maker, which is ranked 16 on CMC.

Algorithmic stablecoins

Even though, stablecoin can be interesting at first thought but the way they are built goes against the principle of decentralization that crypto coins have as a foundation. Thus, many crypto fans and evangelists are positive that stablecoins must be linked towards not a centralized asset but a computer algorithm which takes value from a balance between supply and demand.

Basis is now considered the most promising algorithmic stablecoin of all.

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Can stablecoin ensure smooth future for the crypto industry?

The primary goal of all crypto assets was and remains to come up with virtual asset that would be liquid enough and not vulnerable to market volatility. From this point of view, stablecoins are a dream of all crypto fans and evangelists of a decentralized economy.

Apart from the potential to conduct crypto transactions smoothly, experts believe it can bridge the two worlds – fiat and crypto, bringing them a mutually beneficial coexistence. However, that may take time.

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