Status: 10/19/2021 12:42 p.m.
Speculating with cryptocurrencies is getting even easier: Today, the first Bitcoin-linked ETF is launched on the world’s largest exchange. This could also have a signal effect for the European financial market.
Today the first Bitcoin index fund (ETF) starts on the New York Stock Exchange. The US Securities and Exchange Commission had previously stopped the index fund several times, but this time it did not veto it. A spokesman for the New York Stock Exchange confirmed the start.
With the fund called “Bito”, investors can benefit from the price development of the Bitcoin. To do this, they no longer need to have the cryptocurrency, specific knowledge or technical knowledge themselves. The provider, ProShares, announced that the system is suitable for investors who do not “open an account with a crypto exchange or who want to learn how to store their cryptocurrencies themselves”.
What are bitcoins?
Bitcoins are the oldest and most important cryptocurrency, they were invented in 2009. Cryptocurrencies describe a digital asset, which means that they do not exist in physical form such as paper money or coins. In addition, there is no institution that makes monetary policy decisions or regulates the exchange rate, which means that cryptocurrencies function decentrally: Everyone can participate and be involved in the issue of the coins and the administration of them.
Bitcoin was designed purely as a currency and means of payment. To pay for the bitcoins, the buyer needs the recipient’s address. If a payment is made, the private key is used, so to speak, as a digital signature to confirm it. This means that every transaction is encrypted.
Bitcoins are created through what is known as “mining”: high-performance computers have to cope with complex arithmetic tasks in a kind of public database and update the encryption using what is known as blockchain technology.
Investment in futures
The fund does not invest directly in Bitcoin, but in Bitcoin futures transactions. An investor undertakes to buy a specific product at a specific price for a specified period of time. The providers focus on the futures that approach the price of bitcoins. Therefore, the futures ETF will be exposed to its own fluctuations.
Four other providers want to go public in the USA with similar products. According to media reports, Invesco could start this week. Bitcoin ETFs already exist in Canada, Europe and Asia. The move to the world’s largest stock exchange in New York could mean a breakthrough for the industry, as it has been trying to establish crypto products in the investment market for years. The start of trading is now interpreted as a signal that this could succeed. Parts of the financial industry want to make cryptocurrencies accessible to the masses and get them out of their niche.
Bitcoin back over $ 60,000
In Germany, trading in investment products that are linked to crypto currencies is already possible via so-called ETNs (Exchange Traded Notes). There is not yet a crypto ETF in this country. According to current law, index funds such as ETFs may not be launched with just a single component or asset such as Bitcoin.
Investors reacted positively to the imminent start of trading: Spurred on by the prospects for the first Bitcoin index fund on the world’s leading stock exchange, the price jumped above the $ 60,000 mark for the first time since April. Analysts, however, are cautious: This is a step forward for cryptocurrencies, but not a turning point, says Chris Weston of the brokerage house Pepperstone. There is still a lot of regulatory work to be done for this relatively new asset class.
Criticism of Bitcoin mining is getting louder
Meanwhile, the protests against the controversial Bitcoin business are getting louder. Enormous amounts of electricity are required to “mine” cryptocurrencies. Around 400 kilometers north-west of New York, a decommissioned coal-fired power station was therefore put back into operation, which is now powered by natural gas.
Environmental groups have long been warning of the consequences of excessive Bitcoin mining, which is causing dramatic environmental damage. They warn that no more old power plants that additionally contribute to global warming should be reactivated. “The way our climate is currently doing, measures against the mining of cryptocurrencies are necessary,” said Liz Moran of the Earthjustice organization.
With information from Peter Mücke, ARD-Studio New York