Crypto Market Rises as Bitcoin Rallies After ETF Launch

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Principal Points:

• Cryptocurrencies advance above $2.5tn in market value as Bitcoin is now on Wall Street
• Bitcoin’s first-ever ETF in the US is now available to millions of traders and investors

What’s Moving in the Markets?

The first bitcoin-centered exchange-traded fund is officially trading on Wall Street. In a successful trading debut, the ProShares Bitcoin Strategy ETF rose nearly 5% to close the day at $41,94. Moreover, roughly $981 million of shares were exchanged on Tuesday.

As a result, the newest ETF on the stock market became the second most highly traded ETF on launch day. A warm welcome from investors helped push the price of bitcoin to a session high of $64,450 a coin. In other words, the digital currency was just half a percent from its all-time record of $64,800.

That said, the milestone was cheered from crypto circles, too. The broader digital asset market added about $100 billion to its valuation and climbed well above $2.5tn. While the spotlight was predominantly on bitcoin, other major tokens were mostly flat to slightly higher on Tuesday.

What’s ETF based on Bitcoin Futures?

Now that a Bitcoin exchange-traded fund is here, market participants are optimistic about the outlook for crypto assets. The step marks a strong start toward interconnectedness between cryptocurrencies and traditional financial assets.

“There are a multitude of investors who have brokerage accounts and are comfortable buying stocks and ETFs,” said ProShares CEO Michael Sapir in an interview. “We think this will appeal to them.”

Despite the elevated excitement over the launch of the Bitcoin ETF, critics point to some risks unique to the product. With that in mind, the ETF with a ticker BITO, holds futures, and not actual bitcoin. These futures are traded on the Chicago Mercantile Exchange.

Some of the inconveniences around the Bitcoin futures ETF include price quirks like “contango” and “backwardation”. In other words, for the futures prices to run ahead, or behind, the spot market price, respectively. In turn, this supposes the making of offsetting trades. Additionally, futures include a rollover cost, meaning futures expire every month and the ETF needs to buy next month’s contracts.

What to Watch in the Markets?

In other parts of the broader financial markets on Wednesday, the skyrocketing prices of oil have subdued modestly. US oil, for example, has turned back below $82 a barrel, after surging to over $84 earlier in the week. Brent crude, on the other hand, is trading near $84 a barrel, after having topped $86 on Monday.

In the forex market, the EUR/USD continues its climb to higher grounds. The pair is trading near 1.1650, up about 0.2% on the day. The Japanese yen is reaching an inflection point against major competitors. The USD/JPY is now at a three-year high as traders are figuring out where to take the pair next. Furthermore, the GBP/JPY is now sitting at a five-year top near 158.00.

Economic Data Coming Up Today (EST times)

Consumer price inflation today is scheduled to arrive from the eurozone and Canada. On that note, investors will be watching if prices will remain at high levels for September as inflation concerns are spreading. The eurozone CPI report arrives at 05:00 am, while Canada’s CPI figures land at 08:30 am.

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