On March 11th, the Securities and Exchange Commission will release its ruling on whether or not a Bitcoin ETF will be approved. Back in 2013 the Winklevoss twins, you may remember them from the story on how Facebook Inc. (NASDAQ:FB) was started, filed for their Bitcoin Trust ETF to be approved. Others have been submitted since then, but that ETF will be the first to be approved or denied by the SEC.
Some experts believe the Bitcoin ecosystem could attract as much as $300 million within the first week of the ETF being approved. That sort of cash flow would certainly help the currency move higher from its current $950 per coin value. But, with all the secrecy surrounding the cryptocurrency is this something you want to be involved in from either owning Bitcoins outright or from the convenience of an ETF?
The short answer is, it all depends on who you talk to.
Obviously the Winklevoss twins and thousands of others who own and currently trade the currency believe Bitcoin is the start of the next wave of the future. The argument is often made that no one person or government controls the value or supply of Bitcoins and the market itself determines what each one coin costs.
In many ways, the world already has and has had a currency similar to this in the form of gold. Like gold, Bitcoin has no real intrinsic value other than what one person is willing to give you for it. No one country controls the price of gold or (outside of some big mining countries) controls the supply of gold on the market.
The main differences between gold and Bitcoins are that Bitcoins are completely digital while gold is an actual, tangible thing. Furthermore because Bitcoin is completely digital, it can be traded over the internet in an untraceable fashion.
Another big difference at this time, which many believe will not be the case in the future, is that Bitcoins have been terribly volatile since their inception. Many pro-Bitcoin arguments will note that over the last two years volatility of the currency has fallen, but the fact of the matter is, it's still a problem. Just a few weeks ago it fell below $800 and now it's back around $950.
While the Winkelvoss's may be the first to market if the ETF is approved, SolidX and Grayscale Investments also have applied for Bitcoin ETF's. Grayscale currently runs the Bitcoin Investment Trust (NASDAQ:GBTC) which is a non-management trust that attempts to reflect the performance and value of a bitcoin. GBTC currently trades on the OTC markets, which likely makes it difficult for some investors to buy or sell shares.
As for whether or not you should buy a Bitcoin ETF or Bitcoins outright at this time, my response would be a strong No!
As I mentioned before, we already have a currency hedging vehicle, gold. So if you are concerned about possible deflationary policies why not just use that investment. Gold has been used for thousands of years and not only is the price transparent, but so are the trading vehicles available to you today.
The secrecy behind Bitcoin, who started it, why it was truly started, the fact that it is not easily traceable, thus often leading to it being used on black-market transactions and highly targeted by hackers, just to mention a few make me wonder why I would take on so much risk with a somewhat unproven investment.
Bitcoin is simply this; new technology and investment that could one day be great, but at this time the unknowns with the currency are too large and its future is too cloudy to accurately predict. At this time it just doesn’t make sense to own Bitcoin's or a Bitcoin ETF.
If a Bitcoin ETF is approved, investors would be wise to stay on the sidelines for at least a year and see how the story plays out. Even with the lower volatility Bitcoins have seen over the last two years, Bitcoins will likely continue to be very much a roller-coaster in the coming year, meaning investors will have an opportunity to buy coins at low prices in the future; so no need to worry about missing another Bitcoin boom.
Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor held long positions Facebook Inc. (NASDAQ:FB) at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
This article show that Matt does not have adequate understanding of the concept of crypto currency whether that is Bitcoin or any other.
Once the population wakes to what money is and how it really works, then mass adoption will be a certainty provided the killer apps are launched. This printing of money with inflation manupulated by governmens is a system that has not and will not work, simply because or natural and artificial inflation. You cant keep printing forever, how much will a pint of milk cost in the future? One trillion pounds? Centralized money, centralized govenrment does not work for the individual. The future os society is without centralized currency or government. Crypto currency will give people hope and freedom for the corrupt capitalist banking system we have.
opinion's, everyone has one, or more, in this case, the influence by matt in this matter is a little far fetched, to suggest not to buy anything, leaves the door open for all sort of issue's, so if bitcoin is approved, and goes to five or ten thousand dollars, now what, if folk's wait a year and miss the move of a lifetime, anyone have an answer for someone who makes a suggestion like this, and is this also the opinion of ino?
Hello Rolling Stones,
My opinions on Bitcoin and a possible ETF are just that, mine as it says above in the article disclosure, not of INO.
And you bring up a great point, what if a Bitcoin ETF or Bitcoin itself goes from $950 to over $10,000 in the next year and you missed the investment of a lifetime? Well first off that would be terrible and of course my opinion that investors shouldn't buy Bitcoin now would be bad and of course not the correct advice to take.
But, as I mentioned above, Bitcoin is very risky and while you could makes loads of money investing it it, you could also very easily lose everything you put into it. One of the greatest investors of all time has a two rules when it comes to investing; #1. Don't lose money. #2. Never forget rule #1. That investor is Warren Buffett. Certainly he has as you say "missed out on plenty of once in a lifetime investments" since he never own Apple, Facebook, Google, Microsoft, Amazon or countless other massive growth stocks over the years. But still, he is now one of the wealthiest individuals in the world.
The other thing I thought of when reading you comment is an Initial Public Offering or IPO. Every few years we see "the next greatest investment opportunity" hit the IPO market. While this wouldn't be an apple to apple comparison, the media hype and excitement that comes with a new investment opportunity often brings lots of speculation. That over-hype only lasts for a small period of time and a crash of some size usually follows as early investors bail out.
My point of all of this is, in my opinion Bitcoin is not worth the risk. There are much easier ways to make money investing, but if you must get a piece of the Bitcoin action, you are better off waiting for a period of time, I mentioned a year (which gives the market time to adjust and more accurately understand the supply and demand for the investment), before jumping into the new investment vehicle. Lastly Rolling Stones, I am the first to admit I have been wrong about things in the past, I will certainly be wrong about things in the future, therefore I could be wrong about this.
Good Luck Investing,
Matt Thalman
So we're supposed to just know who the Winklevoss twins are, with no explanation given in your article?
If you don't know, you do not need to be investing in anything. Buy RSP (equal weight S&P) & be done with it.
Sorry I can't add hyperlinks in the comments section, but you can Google them, Tyler and Cameron Winklevoss.
But honestly who they are really isn't important to the fact that a Bitcoin investment really shouldn't be made at this time.