Bitcoin reached a fresh multi-month high last night when it tested $63,000 mark. While bulls failed to push the price above and Bitcoin has subsequently pulled back towards $62,000 handle, the coin continues to trade less than 4% below its all-time highs. Today is a potentially big day for cryptocurrency as the first US cryptocurrency ETF will be launched on NYSE - ProShares Bitcoin Strategy ETF. The fund will not invest in Bitcoins, however. Funds will be invested in Bitcoin futures with full deposit being placed, meaning there will be no leverage included. Just like all other US ETFs, new products from ProShares will be regulated by the SEC and therefore may attract investors that were, up to this point, uninterested in cryptocurrencies due to lack of regulation.
However, a launch of Bitcoin futures ETF also poses some risks. Shares of ETFs can be easily borrowed from long-term investors and used for short selling purposes. This could have similar consequences as the launch of Bitcoin futures at the end of 2017 that provided institutional investors with an easy way to short Bitcoin. A year-long bear market was launched afterwards that saw the Bitcoin price drop over 80%!
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Bitcoin price dropped over 80% during a year following futures launch. Source: Macrobond, XTB Research
However, it does not mean that the story will repeat this time. Cryptocurrencies were still seen as something odd and unusual back in 2017 and steep gains that pushed Bitcoin price towards $20,000 were viewed as a market bubble. Sentiment towards the coin was rather pessimistic and futures launch allowed sceptics to bet against Bitcoin. However, investors seem to understand nowadays that cryptocurrencies are not a one-hit wonder and will think twice before betting against. As a result, opening the cryptocurrency market to new types of investors may not have as grim consequences this time as in late-2017.
Bitcoin is trading less than 4% below its all-time highs from April 2021 on the day of the first US Bitcoin-linked ETF debut. Source: xStation5
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