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Could Bitcoin Ever Beat Gold & Get The Safe-Haven Status?

Introduction

The traditional investors from the last few months are trying to understand the unprecedented financial system. The world is suffering from economic uncertainties, where 20% of the US workforce lost their jobs due to the COVID pandemic situation. At the same time, the precious metal “gold” hit an all-time high in this 2020 summer and stayed on a hike for a long time ever since.

The gold rush in the market might be due to various reasons – US dollar fall, US-China deteriorating relations, and general global economic crisis. Also, cryptocurrency investors advocated that Bitcoin perhaps can beat gold as the safe-haven, but researchers pointed out the fact that BTC is not so performing. As with the stock market fall, the market worth of Bitcoin was also down – which means that BTC can’t be classed as a safe-haven asset.

Bitcoin and Gold Market Risk

Bitcoin and gold have emerged as a leading investment unit to stabilize the economic downfall. In the finance industry, there is no guarantee for returns on investment, so there is always high risk. It’s not true that the value of gold will always rise because, in 2012-2015, it was dropped by $20,000 per ounce. Similarly, BTC value bounces up and down. Gold is not so volatile as Bitcoin currency. Gold is acting as a safe-haven from the last 100 years, and bitcoin is in the market from the last decade.

Can Bitcoin be called a Safe-Haven Asset?

Amid all economic crises, bitcoin price hardly reached $9,011, and that too, with a high risk. So, it can’t be considered as a safe-haven asset due to the following two reasons:

Reason 1

The Bitcoin volume in the market is so small to validate the concept of the safe-haven asset. A safe-haven in the traditional market is the asset whose price rises typically. When there is any risk, the investors simply shift their money from risky assets to a safe one to avoid the loss and to retain their investment value.

In the traditional market, Bitcoin’s share is less than $200 billion US dollar, which is not enough to perform as a safe-haven asset. It lacks federal regulations for transactions, and there is a high risk of scams in the Bitcoin cryptocurrency industry. That’s why the Securities and Exchange Commission also rejected the Bitcoin ETF proposal.

Reason 2

Bitcoin can’t be accessed or used in the environment, having no internet connection. In extreme places, you may be cut-off from the cryptocurrency exchange and Bitcoin traders due to limited internet connectivity. For example, due to any major strikes, most of the time, the government shut down the internet accessibility to slow down the protests and all.

In the meantime, due to no internet connection bitcoin wallet and exchange system get hampered instantly. Therefore, bitcoin can’t be used in the emergency situation, so it can’t be considered as an alternative currency or safe-haven asset.

Conclusion

Gold is a risky asset because of sharp falls, and bitcoin, too, has speculative risk factors. In the case of the safe-haven concept, gold is already declared as a safe-haven asset in the traditional market, while Bitcoin is battling for the title. A wide range of economic forces across the world doesn’t impact its value, as BTC trade executes independently. Despite the global recession and high unemployment, BTC is doing great in the market. But for now, we believe that this is not enough to qualify as a safe-haven asset.

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China Embracing Blockchain & New Technology!

China Embracing Blockchain – A City Launching Blockchain-Powered Notary Program

The city of Suzhou wants to implement a program that would use real-time notarial tracing functions, and that would be powered by blockchain. This pilot program would, as reported in the local news, provide a wide range of notary services in the city of Suzhou, China.
The authorities of Suzhou announced that this program will hopefully help millions of citizens with accessing legal and government offices via the internet. The announcement was made on June 5.
The pilot platform will cover personal freedom, health, life, property rights, and more.

All of the materials will be uploaded and available through the cloud. Both audio and video records will be distributed and shared among notaries involved for legal purposes, therefore facilitating the use of real-time tracing functions.
This network will be called “Suzhou Notary Chain,” and it will allow the administrative law enforcement unit to use this system for online notarization as well as for carrying out the entire process through shared files stationed on the cloud platform.
Unlike the highly-conventional method of storing audio and video files only within a law enforcement database, this blockchain-based notary services platform will be used to process everything from recording to distribution. in theory. This should guarantee “easy data storage, non-tampering, high security, as well as traceability.”

China’s blockchain adoption

China continues to take bold steps towards blockchain technology adoption. It is slowly starting to implement related systems within different sectors of the economy, making it one of the leading countries in the sector. However, China’s stance on cryptocurrency is still not as open as people would like.

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What Does the Introduction of Bitcoin ETFs mean to Crypto Investors? 

Over the last few years, key stakeholders in the cryptocurrency industry have been advocating for the approval of Bitcoin exchange-traded funds (ETFs). Unfortunately, the Security Exchange Commission (SEC) has rejected the ETFs on the basis of the market’s volatility. 

But what exactly are Bitcoin ETFs, and how are they different from actively trading the digital currency on crypto exchanges? 

To answer this question, we need to take a step back and examine how ETFs work in their most basic form. 

What is a Bitcoin ETF? 

Essentially, an exchange-traded fund (ETF) is an investment vehicle that tracks the performance of assets such as securities, bonds, and commodities like gold and oil. The fund can easily be traded on an exchange just like stocks, hence the name. ETFs allow investors to diversify their portfolio without actually owning the underlying assets. 

In the case of Bitcoin ETF, the backing asset will likely be bitcoin futures or actual bitcoins stored in wallets. For investors, holding shares in a bitcoin ETF would mean that you don’t have to worry about the complexity of actively trading Bitcoins in the market, or about safety. This is because the investors’ money is tied to the price of Bitcoin and not the digital currency itself. 

Advantages of Bitcoin ETFs 

Bitcoin ETFs come with some advantages which are crucial to the maturation of the entire cryptocurrency market. 

Big Money Interest

Bitcoin ETFs are a gateway to roping in mainstream investors into the cryptocurrency market. The main incentive here is that the ETF is regulated by brokers, and this increases investor confidence. That said, it will be easier for institutional investors to put their money into the fund in order to diversify their portfolios. Additionally, Bitcoin ETFs make it possible for the less than tech-savvy investors to invest in Bitcoin, thus helping them avoid risky token sales or blockchain-based projects. 

Increased Bitcoin Value

Usually, an ETF dealing with a commodity such as gold keeps a large amount of the commodity in reserve. Likewise, a Bitcoin ETF will be backed by large reserves of the digital coin stored in wallets. As the fund purchases more bitcoin to keep in reserve, the market value of the digital asset will increase.

More so, the fund will redirect the investor money into the Bitcoin global market. In turn, Bitcoin’s price will become more stable, making it more valuable. 

Added Legitimacy

Bitcoin itself isn’t completely illegal but still faces restrictions from various governments. However, if Bitcoin ETFs were to be approved on a major exchange under the regulation of a body such as the SEC, it would become more accepted by the general public. This would also prompt investment managers to include the fund in tax-sheltered retirement plans such as 401ks and mutual funds.  

Cons of Bitcoin ETFs

While there are advantages that come with the addition of Bitcoin ETFs in the market, there are a couple of valid reasons why the funds may be a bad idea. 

First, the funds might take away the decentralized nature of bitcoin holdings. This opinion is tied to the fact that investors don’t own the private keys of the underlying asset. The investors own shares in Bitcoin, which is not the same as owning the asset itself. As such, the fund custodians will have absolute authority on making crucial decisions such as which chain to support in the event of a fork, and even whether or not to issue forked coins to investors. 

Moreover, the entry of big money investors means that there is a high possibility of Bitcoin price manipulation through shorting. These investors may sway even the entire crypto-market to their advantage at the expense of other small-scale investors. It can get even worse considering that Bitcoin ETFs are open to any investors, including those that don’t understand or appreciate blockchain technology. The entry of such investors in the market may jeopardize the intrinsic value of the technology since they are largely more concerned with making profits than the growth and development of blockchain. 

Investing in Bitcoin ETFs

Clearly, the advantages of Bitcoin ETF outweighs its cons.  Although the fund is yet to be approved on U.S. exchanges, there are several functional Blockchain ETFs in European exchanges. Unlike Bitcoin ETFs, blockchain ETFs do not follow bitcoin prices but instead track the performance of companies linked to the blockchain space. Be aware, though, that the ETFs come with tax implications as per the provisions of the Financial Account Tax Compliance Act (FATCA).

Right now, the only Bitcoin financial product available to U.S. investors is  Bitcoin ETN. The two products are similar in that they relieve investors of the burden of owning the asset. However, ETNs are regarded as debt notes rather than a pool of assets. They are often issued by banks and are structured as bonds in the sense that they are unsecured. The only downside of ETNs is that if the underlying issuer goes bankrupt, investors are likely to lose their money. Perhaps this explains why Bitcoin ETNs haven’t gained much traction. 

Conclusion 

Bitcoin ETFs offer a new way of investing in the cryptocurrency market. As an investment vehicle, ETFs serve as a tool for driving Bitcoin adoption as global investors bet on the price of the underlying asset. But it is important to note that the real potential of ETFs is the sheer speculation from the crypto community. Unfortunately, the few ETFs that are in the market can’t be used to ascertain these speculations since they are exclusively offered to specific investors.

Even if ETFs live up to the hype, they still have a long way to go considering that Bitcoin futures still lag behind in terms of trading volume. For now, crypto investors can find consolation in the fact that European exchanges, as well as over-the-counter Bitcoin financial products, are paving the way for the inception of Bitcoin-based ETFs. 

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Wall Street VS Cryptocurrencies – Battle Of The Titans

 

Wall Street VS. Cryptocurrencies


Cryptocurrency investors believed that institutional investors might be the key to Bitcoin’s next bull run for quite a long time. It was a well-known fact that people wished that Wall Street entered the markets as an eager investor, ready to pump money into the young and perspective market. However, that projection misses the mark in two ways:
Wall Street is already investing in the cryptocurrency market while the general public doesn’t know about it;
The last thing Wall Street wants is to “pump” the cryptocurrency market with its capital.
Institutional finance is deeply invested in the cryptocurrency market. However, the fact is also that Wall Street is slowly killing cryptocurrency with the way they do business.

Why is Wall Street killing cryptocurrencies?

Before explaining why Wall Street is killing crypto markets, we need to understand the meaning behind hypothecation. Hypothecation is when a firm that owns equity shares in a company signs those shares away to a lender as collateral.
These shares are not settled physically but rather written as certificates of ownership. This makes these certificates easier to pass along as an ‘IOU.’ This fact opens up a lot of space for speculation as well as manipulation of the crypto markets.


Why is the cryptocurrency market different?

Almost all of the major cryptocurrencies are traded on centralized exchanges, even though they claim to rely on a hard-coded Proof of Work or Proof of Stake consensus algorithms. If a Bitcoin can be rehypothecated many times as brokers and exchanges trade debt and collateral, no one knows who the real custodian of the coins is at the end of the day. In this case, multiple parties own the cryptocurrencies, and no one does. Either all of the parties involved have access to the private key, or no one does.
It’s unclear who owns the Bitcoin because the collateral chain is so long in the case of a hard fork or a broker going bankrupt. When it comes to cryptocurrencies and other ledger-based assets, this complex model of transient ownership simply doesn’t work.


Wall Street steps in

There was a time when Bitcoin was traded exclusively on fiat exchanges. This meant that users could only buy or sell it for fiat on these exchanges. There was no way to short-sell Bitcoin, and there was no option to trade Bitcoin futures or derivatives. All purchases were settled purely in Bitcoin, while that is not the case at the moment. Bitcoin’s limited supply and deflationary nature made it easy for people to calculate the supply and demand and form a market price based on that.
Wall Street’s introduction of Bitcoin futures to its own brokers and exchanges reduced its volatility as these contracts allowed investors to speculate on Bitcoin’s downside and upside. This move balanced the market and made it just as profitable to suppress Bitcoin just as it was to let Bitcoin rise in price. On top of that, the high-frequency trading bots started to trade on the crypto markets, which further reduces their volatility. Sophisticated bot programs like those employed by Wall Street can still be extremely profitable in low-volatility environments.

Why is Bitcoin ETF so beneficial?

The Futures Industry Association (FIA) is a powerful financial trade entity that has a significant influence on the global financial markets. People mostly think that the FIA is responsible for the consecutive delays and rejections of the many Bitcoin exchange-traded funds (ETFs) that have been proposed in the past couple of years.
A Bitcoin ETF would represent a success for the cryptocurrency investors for two main reasons:
ETFs are actually settled in an underlying asset, meaning that there would be less influence created by the cryptocurrency derivatives market;
This feature would create a more simple way of integrating cryptocurrency markets with traditional financial markets via brokers. Bitcoin would become more accessible to retail investors that don’t want to create their own wallets. That could build a bridge that will ensure mass adoption.
Bitcoin ETFs have been mostly flat-out denied, and this includes the ETF proposal from the famous Cameron Winklevoss and Tyler Winklevoss as well as many more.
The rejections and delays were mostly not described wall, which indicates that Wall Street may want the cryptocurrency market to die before it infiltrates the global consumer market. Even though there are multiple avenues for profit in crypto for Wall Street, the threat to the financial world order as we know it cannot be put aside. Wall Street seems to recognize this and want to stop it in its tracks or adapt the technology while keeping its place in the financial world.


Conclusion

Even though Cryptocurrencies are a promising new technology that ensures financial stability once it reaches mass adoption, it would represent the end of the financial world as we know it. Many financial institutions are cautious or defensive towards this market as they can’t predict the future well enough to see themselves in it. For this reason, Bitcoin and other cryptocurrencies face great resistance ahead.