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October 24, 2021 by Lipika Deka
The highly-anticipated Bitcoin ETFs made an official debut on Wall Street this week. This has significantly spurred a massive rally and pushed the crypto market cap to a record $2.7 trillion. However, the investment vehicles has met with its fair share of criticisms.
Former National Security specialist and Whistleblower Edward Snowden took a dig at the big shot Venture Capitalists for heavily investing in what he claims to be “less appealing versions” of Bitcoin instead of allocating their resources to payment-related institutions which would aid in creating the very basic cash registers and applications solely focused on crypto payments. He ironically termed it as a ”Pro gamer move”. Snowden, in his latest Twitter post, stated,
VC guys keep trying to make cryptocurrency a global standard by spending billions to invent less-attractive versions of Bitcoin, instead of just buying payment-system companies to make the most common cash registers and apps support crypto payments by default. Pro-gamer move.
Prominent Bitcoin advocate and Co-founder of Morgan Creek Digital, Anthony Pompliano aka ‘Pomp’ too chimed in to denounce top-level executives as well as investors and founders who take undue advantage “from simply plugging into the bitcoin network.” According to the exec, these market players onboard millions of individual straight away to start working for them without paying a dime.
Bitcoin ETF boon or bane?
Supporters of the flagship cryptocurrency have been advocating the idea for a spot Bitcoin ETF instead of a Futures product as they prefer to own crypto assets rather than through a derivatives portfolio. One of the key arguments against the futures-based bitcoin ETF is that managing those contracts can be extremely expensive, compared to its spot counterpart.
Another interesting factor that needs to be considered are that Contango and Backwardation are unique to the futures product market. The market is said to be in contango when prices of a futures based contract are higher in comparison to a spot price. On the other hand, when the forward future product is lower than the price of spot, the market is said to be in Backwardation. Critics believe that the above conditions do not provide a efficient exposure to BTC for investors.
Many speculates that even trusted digital assets management firm like the Grayscale Investments, with their portfolio called GBTC, may not be as effective in accurately tracking bitcoin prices since there has been instances when it traded at a much higher prices to the underlying asset in the past. At present, it is trading at a discount price to bitcoin amidst investors dumping the product due to the recent entry of ProShares ETF.
It is a waiting game for now. There are many pros and cons to weigh in and gauge how the market players respond in the near future. The launch of these investment vehicles for the institutions have been pivotal and it may subsequently pave the way for such funds for retail investors soon.