Displaying items by tag: bitcoin

The highly anticipated launch of Bitcoin exchange-traded funds (ETFs) in early January was met with a wave of excitement, with investors eager to gain exposure to this burgeoning asset class. However, their enthusiasm was quickly dampened as Bitcoin's price took a hit, dropping nearly 13% in the following days.

Despite the rocky start, a sense of cautious optimism has returned to the ETF space. Bitcoin's recent price surge has reignited investor interest, fueling a significant increase in inflows into these funds. CoinShares, a leading crypto asset management firm, reported (02/19/24) a record-breaking $2.4 billion flowing into Bitcoin ETFs last week, representing a remarkable turnaround.

This renewed demand presents a unique challenge for financial advisors. With clients increasingly inquiring about the potential role of Bitcoin ETFs in their portfolios, advisors need to navigate the complex landscape of this new asset class. While these ETFs offer a convenient way to gain exposure to Bitcoin, their inherent volatility demands careful consideration. Unlike traditional investment options, Bitcoin exhibits significant price fluctuations, making it a riskier proposition for many investors.

Finsum: Bitcoin ETFs got off to a rocky start in January, but flows into these funds are recovering remarkably as the cryptocurrency’s price soars.

A skirmish over fees preceded the long-awaited SEC approval of Bitcoin ETFs, which finally arrived on January 10th. Just days before the historic green light, applicants, including BlackRock and ARK, amended their proposals, slashing or eliminating management fees to woo early investors. This sudden fee competition presents a unique opportunity, favoring those who invest in these ETFs first.

BlackRock's ETF, for instance, carries a 0.30% annual fee, preceded by a mere 0.20% introductory rate for the first year or $5 billion in assets under management (AUM). ARK amended their application, indicating they would waive their 0.25% fee during an introductory 6-month period for the first $1 billion in AUM. These pricing moves reflect the intense competition brewing in the nascent Bitcoin ETF space.

Why the sudden price drop? One answer lies in the inherent simplicity of Bitcoin ETFs. Unlike traditional, diversified index funds with hundreds of securities, these products hold primarily just one asset – Bitcoin. This reduces complexity, leaving ample room for fee compression. Consequently, fees are poised to become a differentiator, influencing investor decisions in this uncharted territory.

However, navigating this new landscape requires caution. Investors should closely scrutinize underlying investment structures and track records of issuers. Due diligence is paramount when navigating this rapidly evolving space.

Finsum: The era of cryptocurrency ETFs begins with a race to lower fees, with many initial issuers slashing fees during introductory periods.

The mainstream financial world is all over the place when it comes to crypto however, Bridgewater Associates is planning on increasing their exposure to digital assets. The firm has made it clear they have some small investments in crypto, Dalio himself advises investors to allocate a small portion of their portfolios into crypto. It will most likely only be a small portion of their $150 billion portfolio but it is in phase 1 of 2. Marshall Wace, Point72 and Brevan Howard have all made crypto investments in the last year.

Finsum: Biden’s most recent crypto executive order legitimizes crypto in many investors eyes because it brings it into the traditional realm.

Biden’s administration has been an outspoken critic of crypto currency and these words now have actions behind them. Biden has signed an executive order to have various government agencies put forth a plan to regulate crypto. The admin is most concerned about consumer protection, national security, and illicit finance. Additionally the explosion in popularity in the industry and the wide array of digital assets is cause for concern because the admin is worried it might be getting out of hand. However, Biden makes it clear they want to maintain an American leadership position when it comes to the growing area of fintech. The director of the National Economic Council and the security advisor see this as a pathway forward to maintaining a leading role in digital assets and the fintech ecosystem.

Finsum: Crypto needs stable regulation; weekly threats coming from global leaders are bad. If this is on that path it's probably a good thing for crypto.

Bitcoin has stumbled as of late, all the way down to $46,000, but Goldman Sachs isn’t backing off their bullishness and they say the price may double to over $100,000 by the end of 2023. The first of the primary reasons is just the groundswell into digital assets generally. The second big factor is how investors will fundamentally see bitcoin moving forward, as a store of value substitute. They see bitcoin eating away at a stalling gold bouillon. To date, bitcoin only makes up a fifth of the ‘store of value’ market, but that could swing all the way up to a market majority. Other cryptos could also jump in to take some of the markets as well.

FINSUM: As Fed uncertainty lingers, investors are going to push themselves more into alternatives to hedge inflation and interest uncertainty and maintain a store of value.