Bitcoin Bedazzles Part II

In the lead-up to the listing, excitement has been building. More so after the U.S Securities and Exchange commission effectively greenlighted the listing in a tweet last week that said

“Before investing in a fund that holds bitcoin futures contracts, make sure that you carefully weigh the potential risks and benefits,”

The ProShares Bitcoin ETF will track the cash-settled Bitcoin futures listed on the Chicago Mercantile Exchange, which tracks underlying movements in Bitcoin.

Hence the ETF is essentially a derivate of a derivative. Investors won’t own the underlying asset (Bitcoin); however, they will obtain exposure to movement in the underlying asset.

The ticker of the ETF is BITO. According to ProShares CEO Michael Sapir

“BITO will open up exposure to bitcoin to a large segment of investors who have a brokerage account and are comfortable buying stocks and ETFs but do not desire to go through the hassle and learning curve of establishing another account with a cryptocurrency provider ... or are concerned that these providers may be unregulated and subject to security risks.”

All valid reasons and surely another step towards more widespread digital asset adoption, but perhaps not as big as some think..

Bitcoin, like all cryptocurrencies, trades 24 hours a day, 7 days a week, 365 days a year. The Bitcoin ETF will only trade for the ~7 hours a day the exchange is open and will not trade on weekends.

This means that if big moves in either direction occur outside of the NYSE trading hours, then investors will not be able to capitalize or stop out of a position as the case may be. Somewhat restrictive in the volatile world of cryptocurrencies.

After all but reaching the target outlined in an article two weeks ago titled Bitcoin Bedazzles “a retest of year-to-date highs near $65,000”, the easy money that followed the rally from below $40,000 has now been taken off the table.

Additionally, there is the risk of a “buy the rumour sell the fact” type reaction like the one that followed El Salvador adopting Bitcoin as legal tender in early September.

While we remain medium-term bullish Bitcoin, we are now neutral in the short term and looking to re-enter longs, ideally on a corrective pullback. The same goes for Ethereum.

Source Tradingview. The figures stated areas of October 19th, 2021. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the company you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.