Large companies from multiple industries became interested and in some cases invested in cryptocurrencies and blockchain in 2021. For example, AMC recently announced that it can accept Bitcoin payments at the end of this year. Fintech companies like PayPal and Square are also betting on cryptocurrencies by allowing users to shop on their platforms. Tesla continues to come and go in its acceptance of Bitcoin payments, even though the company has billions in crypto assets. The most important development in this trend points to the first Bitcoin ETF, which was introduced on the New York Stock Exchange in October 2021.
The ownership of many crypto assets quickly became concentrated among wealthy investors, threatening to widen the already huge differences in wealth. Another version of the future of crypto has co-opted much of the digital payments market by governments. A growing number of central bankers, finance ministers and government officials believe that the best cryptocurrency for the future is the central bank’s digital currency, or CBDC. These nationally issued cryptocurrencies, probably based on blockchain, would be legal tender. They would also make it even easier to track citizens’ spending than it is now, something CBDC leader China has made clear as a prime target of the next digital yuan.
But some say that the BITO ETF is not enough, because although the fund is pegged to Bitcoin, it does not have the crypto directly. While Bitcoin futures are following the general trends of real crypto, experts say it may not directly track the price of Bitcoin. For now, investors should keep waiting for an ETF that contains Bitcoin directly. There has already been a breakthrough on this front, with the first Bitcoin ETF making its debut on the New York Stock Exchange last October. The development represents a new and more conventional way of investing in cryptocurrencies. The BITO Bitcoin ETF allows investors to buy cryptocurrencies directly from traditional investment brokers with which they can already have accounts, such as Fidelity or Vanguard.
In developing countries, especially those where the national currency is not widely trusted, customers and small businesses have easy access to low-cost digital payment systems. International payments are becoming cheaper and faster, causing exporters and importers and even economic migrants to transfer money to their countries of origin. New technologies have created products that could not have been proposed before, including digital toys that often have little practical value, such as unsung tokens and meme cryptocurrencies. But there are also some useful ones, such as smart contracts that allow you to buy and sell financial assets directly without the intervention of traditional intermediaries. At the very least, this should reduce costs and improve efficiency by creating competition for entrenched institutions. However, the reality is that many of these benefits are not being realized.
A $500 million increase last January brought its valuation to $32 billion, making it the third most valuable private fintech-based or doing business in the United States. With its fast-growing U.S. business, FTX US (valued separately at $8 billion), the Bahamas-based company is chasing its list predecessors Coinbase, Kraken and Gemini. Cryptocurrencies also face challenges in terms of energy consumption, privacy and security. It’s unclear if these low market cap crypto issues can be solved without hollowing out the elements that made cryptocurrencies popular in the first place. The recent launch in the United States of a short Bitcoin ETF, which allows investors to take advantage of drops in the price of bitcoin, allows investors to hedge their positions and trade against bitcoin. Resolute bitcoiners can always find positive signs in the market and many use on-chain statistics to determine good times to buy.
Instead of learning how to navigate a cryptocurrency exchange to trade your digital assets, you can add cryptocurrencies directly to your wallet from the same brokerage that you already have a retirement account or another traditional investment account with. At the same time, the traditional financial sector increasingly accepted cryptocurrencies as a legitimate asset class. A 2021 survey of institutional investors found that seven out of 10 expected to buy or invest in digital assets in the future. However, this combination of maturity and acceptance also increased the correlation between the stock market and cryptocurrencies, leading to a decrease in their safe haven properties. There are downsides to the cryptocurrency revolution that have become apparent in recent months. The appeal of easy-to-make money by investing in cryptocurrencies proved tempting for many investors.