Bitcoin ETF: A fresh start in crypto investing

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More invest­ment options are now avail­able for cryp­to, and advo­ca­cy on sound finan­cial lit­er­a­cy and risk man­age­ment is essential.

On Jan­u­ary 10, 2024, the world wit­nessed a mile­stone of one of the most excit­ing fin­tech inno­va­tions of our time,  the approval of the U.S. Bit­coin ETFs. The vic­to­ry sym­bol­izes the mat­u­ra­tion of blockchain tech­nol­o­gy and a strong demand from glob­al investors. In a mat­ter of days, the Bit­coin ETFs broke a record of ETF inflow, sur­pass­ing Sil­ver ETF in the U.S. as the top 2 in terms of volume.

There is no doubt that glob­al investors now have a much eas­i­er and more com­pli­ant way to access cryp­to. This is cer­tain­ly good for the cryp­to indus­try, but fur­ther growth is need­ed to con­vince broad­er retail investors in the tra­di­tion­al finance space, where retail investors’ trad­ing vol­ume is less than half of that of insti­tu­tion­al, accord­ing to Coin­base. In oth­er words, the cur­rent trad­ing vol­ume by retail has decreased from 80 per­cent to around 40 per­cent since 2018. This is poten­tial­ly con­cern­ing if the cryp­to indus­try aims to influ­ence the cul­ture and per­spec­tive of the lega­cy finan­cial system.

In a recent con­ver­sa­tion with a fel­low investor, Louis, a for­mer tech con­sul­tant at a lead­ing bou­tique con­sult­ing firm in Europe, he expressed his con­tin­u­ing inter­est in cryp­to invest­ing. “I’m attract­ed to the advan­tages of decen­tral­iza­tion and its impli­ca­tions for var­i­ous appli­ca­tions and indus­tries such as pay­ment and a form of glob­al cur­ren­cy, in the case of Bit­coin, that is not influ­enced by the government’s deci­sion,” he said.

“But the lack of the reg­u­la­tion clar­i­ty, account­ing stan­dards, or val­u­a­tion mod­els makes it hard to choose the best cryp­to among thou­sands of options,” he con­tin­ued. Much of the cryp­to indus­try grap­pled with scan­dals over the past few years with big names falling out. The dra­ma damp­ened investor con­fi­dence in this asset class and turned many to AI, which has seen a stel­lar rise in the past year.

Sim­i­lar to ETFs in tra­di­tion­al finance, Bit­coin ETFs offer retail investors a secure and has­sle-free invest­ment expe­ri­ence. Unlike buy­ing direct­ly from cryp­to exchanges, which can be con­fus­ing as one has to wor­ry about the secu­ri­ty and com­pli­ance of their ser­vice provider, with one exam­ple being FTX, where its cred­i­tors are still claw­ing back their lost funds.

In this per­fect mar­riage where Bit­coin and ETFs can be reg­u­lat­ed, investors can be pro­tect­ed by the rel­e­vant secu­ri­ty laws under the SEC. Investors can final­ly be assured that their invest­ment is con­duct­ed by licensed ser­vice providers and con­fi­dent about redemp­tion or funds withdrawals.

To make informed deci­sions, both the pri­vate and pub­lic sec­tors also need to do more to offer qual­i­ty investor edu­ca­tion on the risks of cryp­to invest­ing. The Chair of the SEC Gary Gensler warned of the risks of cryp­to invest­ment before approv­ing all 11 spot ETFs. “Invest­ments in cryp­to assets also can be excep­tion­al­ly risky & are often volatile. A num­ber of major plat­forms and cryp­to assets have become insol­vent and/or lost val­ue. Invest­ments in cryp­to assets con­tin­ue to be sub­ject to sig­nif­i­cant risk,” he said.

On the cryp­to company’s lev­el, blockchain tech­nol­o­gy offers abun­dant data and trans­paren­cy in terms of on-chain activ­i­ties. How­ev­er, lack­ing a stan­dard­ized val­u­a­tion mod­el or ana­lyt­ic tools for day-to-day investors can be frus­trat­ing when mak­ing huge bets. Cryp­to com­pa­nies, espe­cial­ly big exchanges, can sure­ly offer help­ful toolk­its for investors with dif­fer­ent lev­els of experience.

“High volatil­i­ty and lack of strong over­sight by the reg­u­la­tors make it hard to make con­fi­dent deci­sions and fil­ter for the best options. As a per­son who has lim­it­ed knowl­edge on the top­ic, it seems that invest­ment and spec­u­la­tion are blurred,” Louis added.

At the end of the day, Bit­coin ETF rep­re­sents a fresh start for cryp­to invest­ing where com­pli­ance, secu­ri­ty, and most impor­tant­ly con­fi­dence. More cryp­to ETFs will fol­low suit with a stronger focus on investor edu­ca­tion and pro­tec­tion, we are only at the begin­ning of mass adoption.

Yiwei Wang is an avid blockchain enthu­si­ast with a focus on the inter­sec­tion of cryp­to, eco­nom­ics, and pub­lic pol­i­cy. He was pre­vi­ous­ly the Glob­al PR Lead at Babel Finance and he began his career at Ogilvy in Bei­jing. He is cur­rent­ly the Head of Glob­al PR at Metalpha.

TNGlob­al INSIDER pub­lish­es con­tri­bu­tions rel­e­vant to entre­pre­neur­ship and inno­va­tion. You may sub­mit your own orig­i­nal or pub­lished con­tri­bu­tions sub­ject to edi­to­r­i­al discretion.

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