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All You Need To Know About The Bitcoin ETF

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Over the past two months, the news has been rife with stories about Bitcoin ETF applications situated within the United States Securities and Exchange Commission (SEC). We all know that the general goal of the Bitcoin ETF is to make it easier for institutional investors to invest in Bitcoin and we know that the SEC are responsible for giving such applications the go ahead. The last thing we know is that when the SEC reject ETF applications, the markets act negatively, therefore we can guess that if the SEC accept an ETF application, the markets will fly high.

In essence, the markets are very sensitive to the Bitcoin ETF decisions, however in order to understand why this is the case, we need to understand the Bitcoin ETF model on a fundamental level.

What on earth is a Bitcoin ETF?

ETF stands for Exchange Traded Fund, therefore an ETF is a security that tracks another index. ETFs trade on traditional stock exchanges and change in value as a result of buying and selling.

According to Investopedia:

“An ETF is a type of fund that owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, etc.) and divides ownership of those assets into shares. The ownership of the fund can easily be bought, sold or transferred in much the same way as shares of stock, since ETF shares are traded on public stock exchanges.”

Within Bitcoin specifically, the Bitcoin ETF will act as a fund that owns the underlying asset of Bitcoin and will be able to divide the ownership of that Bitcoin into shares which in turn can be bought by investors and institutions.

You might wonder then, if this is the case, why don’t institutional investors just cut out the middleman and invest in Bitcoin directly, what’s the point in going through an ETF:

“A bitcoin ETF is one that mimics the price of the most popular digital currency in the world. This allows investors to buy into the ETF without going through the complicated process of trading bitcoin itself. Moreover, because holders of the ETF won’t be directly invested in bitcoin itself, they will not have to worry about the complex storage and security procedures required of cryptocurrency investors.”

In essence, direct Bitcoin investment is complicated and risky, the ETF format takes away a lot of the effort and of course the risk, making it more attractive to institutional investors. Within this institutional investors won’t have to navigate complicated security parameters and they won’t even have to deal with the crypto exchanges themselves either. So in essence, though the ETF looks like a middleman, it still skips out a big chunk of the traditional Bitcoin investment process.

Most importantly:

“ETFs are much better understood across the investment world than cryptocurrencies, even as digital coins and tokens have become increasingly popular in recent years. An investor looking to get involved in the digital currency space but without the time necessary to learn about all of the ins and outs could focus on trading a vehicle he or she is likely to have a better understanding of already.”

Institutions get how ETFs work, so, it makes sense to build a Bitcoin product to suit their needs right?

This all sounds great, why don’t the SEC like the idea of a Bitcoin ETF?

This is when it gets a little complicated. On paper, it seems like a great idea but it’s actually a lot more complex than it sounds. Let’s look at why one of the most prolific applications, the Gemini Exchange ETF, was rejected – simply put the SEC believe that the problem with Bitcoin ETFs isn’t the ETF model, its the fact that Bitcoin is still traded on unregulated exchanges and is therefore susceptible to manipulation.

It seems that the SEC aren’t so concerned about the ETF platform, they are actually concerned about Bitcoin as the asset linked to the ETF.

According to Goldseek, this isn’t exclusive to just Bitcoin either, worldwide many ETF applications are rejected simply because the asset they are linked to isn’t considered to be secure enough:

“This logic used by the SEC needn’t just apply to bitcoin. It might explain why there is no rhodium ETF in the U.S., for instance, whereas there is one in both Europe and South Africa. Since there is no exchange that offers rhodium futures and the spot market is relatively opaque, it would not be possible for an SEC-regulated exchange to set up the information sharing agreements necessary for SEC approval of a rhodium-based financial product. This echoes what I said at the outset: the SEC’s decision is less about bitcoin and more about grappling with the complexity of market structure in an age in which financial magicians are trying to package everything into an exchange-traded product.”

So, what’s the outlook for the future?

It’s very uncertain. The state of the Bitcoin ETF applications is very much in limbo at the moment, we can’t tell when or if these applications will be approved, though we do know that in September a number of decisions are set to be made.

We are optimistic that a Bitcoin ETF will be approved by the SEC soon enough, one reason for this is that the SEC are now seeking public opinion, something that would only be relevant if the SEC intended to see a Bitcoin ETF through to some sort of approval, according to Investopedia:

“The SEC has also opened up bitcoin ETF applications to public comments, with the vast majority of commenters voicing their approval for the new product. If and when the first bitcoin ETFs are launched, it’s likely that they will see early success, as both cryptocurrency enthusiasts and traditional investors take part. In turn, the rise of bitcoin ETFs could also help to fuel gains in bitcoin as well, and, because many other digital currencies are closely tied to the performance of bitcoin, gains across the cryptocurrency market.”

Bitcoin will see an ETF in the future, if not this month, maybe it will be next month. Or perhaps we won’t see one approved for a few years. One thing is for sure, when a Bitcoin ETF is approved, Bitcoin will fly high and the markets will finally open up to high level and high value institutional investment. The future of Bitcoin is certainly within the Bitcoin ETF and it’s a future we are all very excited about.

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Bitcoin’s Mining Costs Will See It Bottom out at $6,000, Traders Argue

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Two well-known traders, Brian Stutland and Jim Iuorio, have recently revealed they believe bitcoin has a major support at the $6,000 thanks to its mining costs, which means it may be the bottom of the cryptocurrency’s downtrend.

Speaking to CNBC, the traders noted that while it may be too expensive for the “average person” to start mining the flagship cryptocurrency, some of the miners will find it difficult to mine profitably if the cryptocurrency falls below the $6,000 mark.

Their comments came shortly after bitcoin lost over $1,000 in a 24-hour period, after reports suggested Goldman Sachs had dropped its plans to open a bitcoin trading desk in the near future and a whale moved over $100 million to cryptocurrency exchanges.

Brian Stutland stated:

It’s going to be difficult [to profit] once we get down to this $6,000 level I think that’ll act as some support there. But look, do we really need Goldman Sachs? The point of cryptocurrency was to get people out of the banking system, and bank and transactions offline from that.

Goldman Sachs’ chief financial officer (CFO), as CryptoGlobe covered, later on revealed the reports were false as the company is still working on “setting up a trading desk to make markets in digital currencies such as bitcoin.” It’s moving into the crypto space in “response to client interest in digital currencies.”

Per Stutland’s words, while the drop created “some selloff” the bottom will be reached a $6,000. Jim Iuorio then noted bitcoin price charts point to a potential bounce if the cryptocurrency manages to go through $6,480.

If bitcoin goes through that level, Iuorio said, the cryptocurrency will “come out of that little consolidation it’s been on” and go up to $6,800. If it fails to do so and trades under $6,300, he added, it’ll fall back to $6,000.

At press time, BTC is trading at $6,470 after rising 1.38% in the last 24-hour period, according to CryptoCompare data. The cryptocurrency seemingly started recovering after reports suggested crypto exchange Coinbase was tapping the expertise of $6 trillion asset manager BlackRock to launch a crypto ETF.

As CryptoGlobe covered adoption has been growing, as billionaire Tilman Fertitta, owner of the NBA basketball team Houston Rockets, recently started accepting bitcoin and bitcoin cash in hos Post Oaks Motor Cars dealership.

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What are Forks and Airdrop in Cryptocurrency?

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The cryptocurrency industry boasts of many technical terms of which most of them need no tedious search to understand them as they are self-explanatory. One of the frequently used terms in the industry is airdrop.

The word combination alone provides a gist of what it really means, however, it may not have a literal meaning as it may be assumed to be. This post identifies and explains two important most-used terms in the industry.

Airdrop

Airdrop does not literally means “drops” fall from the air or the air really drops. It signifies a free distribution of tokens or cryptocurrencies for a specific purpose. In most occasions, cryptocurrency companies decide to reward their early adopters by distributing a proportion of free tokens to them.

In addition, some companies ask interested parties to perform minor tasks, including liking their telegram page, following them on twitter and few other instructions to stand a chance of getting a portion of the distribution.

As this may be a marketing strategy to get more people on board to build a community, this may also be a strategy to evenly distribute tokens in order to avoid market manipulation by large token holders.

Airdrop is very common among the newly introduced coins that need a kind of popularity to rise to the moon.

Forks

Fork in cryptocurrency has a general meaning of dividing or introducing an updated version of an existing cryptocurrency. When inventors realize that an existing cryptocurrency falls short of a particular function, a similar but upgraded version is introduced.

A good example is Bitcoin and Bitcoin cash. Bitcoin gave birth to Bitcoin cash in 2017 after inventors announced on a fork that was intended to make the digital world even better.

Forks are categorized into two; Hard folk and Soft Folk. Hard fork has been explained to be a permanent diversion from an existing Blockchain with the nodes of the new Blockchain not interacting with the transactions of the old one.

Soft Node is quite different. Transactions of the non upgraded nodes are recognized by the new upgraded ones; however, when the non upgraded node mines blocks continuously, the new nodes will reject them.

In this case, enough hash power is needed to make it succeed. It is believed that the existence of a fork makes the future of cryptocurrency very bright. Possibility of a fork can address so many problems in the cryptocurrency industry.

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What Next For Ethereum (ETH)?

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Ethereum (ETH) has had a rough week in the crypto markets. On the 5th of September, right before the whole market lost close to $40 Billion in a day, ETH was valued at $280 and seemed to have considerable support at that level. Then the news hit that Goldman Sachs have decided not to proceed with plans for a Bitcoin (BTC) and Crypto trading desk. The entire market tanked. ETH fell in the markets to current levels of $219 as the news about Goldman Sachs have since been declared as fake news.

Fears of Further Decline and ICO’s Dumping ETH in the Markets

The Ethereum HODLers in the crypto community are concerned that ETH will continue falling to levels well below $200.The last time ETH went below this levels was back in mid September when it was valued briefly at $195.

With the constant rumors that ICOs are selling the ETH they raised last year and early this year to avoid further losses, the concern still lingers of the possibility of the digital asset continuing to depreciate in value. Although this claims have not been confirmed, the theory is plausible given the tonnes of crypto that was poured into ICOs from late last year to date.

Will it Go To Zero?

The extreme side of events is that ETH will plummet to zero as everyone ditches the digital asset for more stabler coins such as Stellar (XLM). There is also the theory that ETH can be replaced as the preferred ‘gas’ payment on the Ethereum network thus making the digital asset obsolete. However, the Ethereum community would not agree to such a radical overhaul of the network’s operations.

A Call for a New Ethereum Network

This then leads to a new discussion that the Ethereum network needs to evolve with the times or risk being obsolete as more efficient networks are created. These include the likes of Tron (TRX), Zilliqa (ZIL) and Neo (NEO). Of particular concern are the security vulnerabilities in Ethereum smart contracts as well as the network having congestion issues that need to be solved by increasing its throughput.

Waiting It Out

The good thing is that ETH still has fans and HODLers who are willing to wait out the current storm in the form of a bear market. There are also high hopes that the scalability issues on the network will be solved very soon further injecting the much needed life into the digital asset.

In conclusion, the digital asset of ETH is facing some trying times in the crypto markets as it has dropped 85% since its peak value of $1,400. With the bear market still in full force at the moment of writing this, there is some fear that its value could drop further. However, the long term future of ETH is still bright if its network can evolve with the times.

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