[hMerits] What will happen to Bitcoin if the ETF applications are granted?

[Jet Cash]

Today we are introducing hypothesis merits (hMerits). These are awards for good posts answering "what if " questions. Usual rules apply, but this is open to everybody - newbies and juniors especially. So here is the question.

The SEC has just rejected the ETF ( Exchange Traded Fund) application by the Winklevoss twins, but there are several other applications in the pipeline. 'what if' some of those are granted? What will happen to Bitcoin and its price?

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[TomCrypto]

In short, and a lot of people seems to think that, ETF will allow new players with huge cash to buy/sell some bitcoin. Therefore with this new cash influx it will increase bitcoin marketcap and hence its price.

We can have the hypothesis that Bitcoin ETF may have the same effect on price than the gold ETF had on gold price. To illustrate this last sentence i will take a graph that I found on twitter (the reference of the twitter where I found it is on the picture)


But today the cryptoworld may not be ready to have this ETF approuved yet and may need to demonstrate more regulation to allow the SEC to grant the ETF. And this regulation may limit the volatility of BTC and therefore the price increase that it could generate in a short time.

[Retty]

Well JetCash. My opinion is that the CBOE have the greatest chance (at present) of getting the hallowed ETF pushed through, as essentially its (CBOE) going to act as an insurance to crypto and therefore bring a broader spectrum of investors to the table who will see it as a safer asset as and when the ETF gets approved.

Initially, in the first 24 hours i expect a MASSIVE spike which i couldnt put a figure on, then people taking profit and scaring all the new investors away!  (only joking with that last bit!) I'd then expect the price to settle at a far higher low and then FOMO and renewed global coverage could take it stratospheric in the following months depending on further positive news and a real bullish market reversal.

I do think its a matter of 'when' and not 'if' with this ETF and i look very much forward to the day it happens! 

[vphasitha01]

I think when people heard the word of "ETF",(Exchange Traded Fund) suddenly goes back and analyse how gold price moves upward dramatically with the introduction of ETF for Gold market. I believe we can't do that comparison due to few reasons such as different market place, different asset class, different time etc.

However if SEC has granted ETF application means removal of liquidity constraints, more accessibility can be happened. That would surely do some kind of positive impact on price of Bitcoin(actually other Altcoins too), but   we can't expect long bull run like gold had. People still searching the answers for problems like safe storage, hacking when it's coming to the cryptocurrency.

[LoyceV]

In short, and a lot of people seems to think that, ETF will allow new players with huge cash to buy/sell some bitcoin.

I often read that indeed, but I have my doubts. Currently, it's quite easy to buy Bitcoin, and if you have a lot of money to spend, you can just hire someone to do the technical stuff if you need to.
I think the main difference is how easy it will become for new buyers can enter the market, if they can do it from their old convenient online investing environment.
As far as I know, there isn't a single Bitcoin exchange that allows regular automated buy-ins, while I can easily make an automated monthly deposit into almost any investment fund. I don't dare speculate how much influence this can have on the Bitcoin market.

We can have the hypothesis that Bitcoin ETF may have the same effect on price than the gold ETF had on gold price.

I've never bought gold (other than juwelry), but I would argue against this for the same reason as I did above. It's much easier to buy Bitcoin than buying gold, I wouldn't even know how to check if the gold is real, and not filled with some other cheap heavy metal. Then again, I'm not the average investor, and more possibilities to buy Bitcoin will for sure not lead to less transactions.

I have a different (but related) question that has been on my mind for a while: what if another country approves a Bitcoin ETF? Forget about SEC approval, let's say China or France accepts one. Will that have a similar influence on the Bitcoin market?

[bitmover]

In short, and a lot of people seems to think that, ETF will allow new players with huge cash to buy/sell some bitcoin.

I often read that indeed, but I have my doubts. Currently, it's quite easy to buy Bitcoin, and if you have a lot of money to spend, you can just hire someone to do the technical stuff if you need to.

Some institutions are not buying btc not because it's  technically hard, but for legal reasons.

Bitcoin risk is not correlatated to any other assets, such as stocks or bonds
This is a rare characteristic and many players look for assets like this all the time, so they can diversify and reduce their portifólio volatility and risk.

If they are all in sp500 and us bonds, and if there is some sort of collapse in us economy, they are fucked.

Many institutions such as pension funds want to get in bitcoin. But they can't for legal reasons. A pension fund cannot open an account on coinbase and buy some btc and store it in a ledger. But maybe they can buy a future.

These legal instruments (futures, etf) will bring those players for the market.  for legal reasons.

[scambust]

Ordinary people without the stomach to risk and learn about cryptocurrencies can now invest in Bitcoin. They don't have to understand about wallets, wallet security or even how to send Bitcoin.

[denis-z12]

It would allows fresh capital to flow into the crypto markets. Crypto currencies would become an option for investors to invest their money using established funds with proven track records. Clients who dont even know and dont care what Bitcoin is would would have more security investing if they see that partners with proven track records are handling their money.
But I dont think this would help change the volatility of this industry and might even make it worse. These investment funds will not adopt the HODL mentality and will be interested in the profit only so we can expect prices going up fast and going down the same way. 

[LoyceV]

Ordinary people without the stomach to risk and learn about cryptocurrencies can now invest in Bitcoin. They don't have to understand about wallets, wallet security or even how to send Bitcoin.

What would happen if the ETF itself loses funds? It's happened to many exchanges, either through a hack or an inside job, even for the ones who claimed to be secure.
It's not just a rhetorical question, exchanges are still popular despite the risks involved. Would all ETFs be abandoned if one of them loses funds, or would people still continue using them?

[madnessteat]

In the past, the SEC has repeatedly rejected applications for the launch of Bitcoin-ETF. Many people think that there is no launch of the ETF may not be, in principle, as the main criteria to launch the ETF cannot be met. But if the application is accepted, we will definitely see new highs of Bitcoin. I apologize for my English.

[scambust]

Ordinary people without the stomach to risk and learn about cryptocurrencies can now invest in Bitcoin. They don't have to understand about wallets, wallet security or even how to send Bitcoin.

What would happen if the ETF itself loses funds? It's happened to many exchanges, either through a hack or an inside job, even for the ones who claimed to be secure.
It's not just a rhetorical question, exchanges are still popular despite the risks involved. Would all ETFs be abandoned if one of them loses funds, or would people still continue using them?

We all know nothing is really secure when almost everything is accessible online. We have heard stories of billions of dollars lost through hacking in the financial world. But did it stop people from using banks? I think the fact they are insuring people's investments is the key here as it takes away some of the risk involved in being your own bank.

[Jet Cash]

Thanks for the replies.

I'm surprised that nobody has mentioned that the increasing involvement of the banking elite may not be good for Bitcoin, and may be an attempt to move it away from being a peer-to-peer instrument.

The original idea was to provide a stable method of transferring funds between individuals, and not require the involvement of the banks, If you wanted to save 'money' you didn't need to do anything, you just left your coins on the blockchain. All of the problems derive from the banking type services that have spawned to take advantage of the Bitcoin concept, ETFs and other financial instruments provide bankers with a means to manipulate the price of Bitcoin, and a means to remove Bitcoin from daily use in the crypto economy.

[jackg]

Thanks for the replies.

I'm surprised that nobody has mentioned that the increasing involvement of the banking elite may not be good for Bitcoin, and may be an attempt to move it away from being a peer-to-peer instrument.

The original idea was to provide a stable method of transferring funds between individuals, and not require the involvement of the banks, If you wanted to save 'money' you didn't need to do anything, you just left your coins on the blockchain. All of the problems derive from the banking type services that have spawned to take advantage of the Bitcoin concept, ETFs and other financial instruments provide bankers with a means to manipulate the price of Bitcoin, and a means to remove Bitcoin from daily use in the crypto economy.

Banks are careless, they've proved that repeatedly.
If a bank loses 100000BTC the price of bitcoin will be pushed up as they will either: cause hyperinflation on their country which will push the price up internationally if it's a UK/US/EU bank; or cause the bitcoin price to boom as the bank buys up the 100000BTC it lost. Although this may also cause a lot more issues economically for certain countries so this should be predicted by any bank that wants to encourage this system.

Even safe deposit boxes have proven themselves to be unsafe (the gang who drilled about a metre into the side of a concrete wall in London a few years ago springs to mind) where they made off with millions of pounds of precious items.

[squatter]

The SEC has just rejected the ETF ( Exchange Traded Fund) application by the Winklevoss twins, but there are several other applications in the pipeline. 'what if' some of those are granted? What will happen to Bitcoin and its price?

I'm ambivalent about it. On one hand, an ETF approval would give some sense of legitimacy in the establishment/legacy finance world. A government rubber stamp can definitely affect public perception.

On the other hand, I don't understand the explanation that institutions are "waiting" for an ETF. I don't think they are, and I don't think an ETF will fundamentally affect demand in a huge way. I think it might be a great excuse for a rally, but I don't buy the idea that ETF approval means massive amounts of money being pumped into the market.

[vladimirhf]

Thanks for the replies.

I'm surprised that nobody has mentioned that the increasing involvement of the banking elite may not be good for Bitcoin, and may be an attempt to move it away from being a peer-to-peer instrument.

The original idea was to provide a stable method of transferring funds between individuals, and not require the involvement of the banks, If you wanted to save 'money' you didn't need to do anything, you just left your coins on the blockchain. All of the problems derive from the banking type services that have spawned to take advantage of the Bitcoin concept, ETFs and other financial instruments provide bankers with a means to manipulate the price of Bitcoin, and a means to remove Bitcoin from daily use in the crypto economy.

I'm not surprised. It's already manipulated and the volume is higher on centralized exchanges, not p2p.
But I'll try an idealistic point of view next time Some people I know can't even use an ATM, but I hope they will become btc miners soon.

A government rubber stamp can definitely affect public perception.

I think this is the point.

[loicuagio1979]

Btc etf is not the magic stick but it's one of the most important conditions for whales, funds and institutional investors to take it into their serious consideration and gradually pour their money into in the time to come because they are protected by law. In the long run, btc etf will help to stabilize the btc market price and we will seldom see the dump and pump of btc and other cryptocurrencies. Though the Winklevoss twins application has been rejected, we are now waiting for Starbucks and Bakkt in late 2018 which can pave the way for btc etf to be accepted by SEC next year

[LoyceV]

I'm surprised that nobody has mentioned that the increasing involvement of the banking elite may not be good for Bitcoin, and may be an attempt to move it away from being a peer-to-peer instrument.

The original idea was to provide a stable method of transferring funds between individuals, and not require the involvement of the banks, If you wanted to save 'money' you didn't need to do anything, you just left your coins on the blockchain.

This isn't something I worry about. To Bitcoin, it doesn't matter what an ETF or anybody else does. Bitcoin will still work the same as it always did for other users. We can still make transactions, and it will still be as safe as it is now.
And the fact that they can't change it, is probably why banks and governments are so afraid^* of it.

^* I'm using the word "afraid", because I can't think of another reason why they keep mentioning how risky Bitcoin is.

[The Cryptovator]

The SEC has just rejected the ETF ( Exchange Traded Fund) application by the Winklevoss twins, but there are several other applications in the pipeline. 'what if' some of those are granted? What will happen to Bitcoin and its price?

As well I know SEC didn't rejected. SEC has postpone ETF proposal. Probably until end of September ETF has postponed. Yes there was some other ETF proposal was already rejected. For Bitcoin still pending.

"What if " some application grunted, first benefit is Bitcoin will be open investment for worldwide investor. All the big investor will start invest on Bitcoin. I can't wonder how will increase Bitcoin price due many investor will invest at once. Price can cross 20k within week after approved. Many bank will be also accept Bitcoin as a currency. It's look every thing positive about ETF. I don't know exactly what thinking SEC. May be they worried about regulation & control about Bitcoin. But it can't be ever control.

[Juggy777]

Today we are introducing hypothesis merits (hMerits). These are awards for good posts answering "what if " questions. Usual rules apply, but this is open to everybody - newbies and juniors especially. So here is the question.

The SEC has just rejected the ETF ( Exchange Traded Fund) application by the Winklevoss twins, but there are several other applications in the pipeline. 'what if' some of those are granted? What will happen to Bitcoin and its price?

There's been a lot of confusion and hysteria since this etf was rejected, people read the headline and panicked. Let's clear it for once and all, sec was right to reject this etf as it was not filed as per the rules.

The ETF we're waiting for is the one that CBOE will file, and that one I'm positive will get approved.

I'm not a financial wizard, but Bitcoins and ETF is a deadly combo for an saving investment tool, it's a unique way to diversify one's portfolio spread the risk. That also means added volumes of trade of people, more investment coming, higher the sentiments and as we'll know bitcoins is limited, it's prices are bound to shoot up.

Though there'll be regulatory hurdles, but that's a small price to pay as I would like to see the long term returns.