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Bitcoin prices soared Tuesday afternoon after the Securities and Exchange Commission’s post on X appeared to give Bitcoin a major breakthrough.
A few minutes later, SEC Chairman Gary Gensler broke the euphoria. saying X reported that a hacker had taken over a government agency’s account and sent fake messages. The price of Bitcoin has plummeted.
Excitement swirled around the long-awaited approval of a trading product called a Bitcoin exchange-traded fund (ETF), which some analysts believe will bring in tens of billions of dollars in investment this year and push Bitcoin’s price higher. He says there is a possibility of a sharp rise.
On Wednesday, the SEC has a deadline to decide whether Bitcoin ETFs are legal.
Bitcoin ETFs allow investors to buy an asset that tracks Bitcoin price movements without the inconvenience and risk of buying the cryptocurrency itself. But critics have warned that the investment product could harm investors who are exposed to the volatility and uncertainty of cryptocurrencies.
Here’s what you need to know about Bitcoin ETFs and what’s at stake in their potential approval.
What is a Bitcoin ETF?
Bitcoin ETFs use a decades-old trading method as a way to facilitate investing in digital assets.
An ETF represents a bucket of securities that provides a way for investors to bet that the price of the underlying asset will rise without having to buy it.
For example, gold ETFs allow individuals and institutions to invest in price fluctuations in the precious metal, rather than buying, carrying, and storing the physical object.
Bitcoin ETFs will provide investors with access to the crypto market without facing the technical hurdles and fees associated with operating a crypto exchange.
Traders can find Bitcoin on traditional trading platforms and markets that many people consider trustworthy, allaying concerns about the relatively new and scandal-riddled crypto technology.
Top investment firms such as Fidelity and BlackRock plan to offer Bitcoin ETF products if they receive federal approval.
Nearly 90% of U.S. adults say they have heard at least a little about cryptocurrencies, but three-quarters say they have no confidence in the safety and reliability of current investment vehicles in cryptocurrencies. An April Pew survey found that
What happens when Bitcoin ETFs become available?
Some analysts say the new product could unleash a flow of investment and cause a huge jump in the price of Bitcoin, sending the most famous and successful digital asset significantly higher.
Bitcoin ETFs will generate more than $14 billion in investment inflows within one year of being on the market, and nearly $40 billion in investment inflows by the end of the third year, according to cryptocurrency management and research firm Galaxy Digital. right.
UK-based lender Standard Chartered Bank offered a more bullish assessment, saying the financial product could trigger up to $100 billion worth of inflows by the end of this year, according to crypto outlet Coin. Desk reported on Tuesday.
Under such a scenario, the price of Bitcoin could reach nearly $200,000 by the end of 2025, more than four times the cryptocurrency’s current value, according to CoinDesk Standard. Chartered Bank said.
The price of Bitcoin has risen nearly 70% in the past six months, with expectations that it will soar if a Bitcoin ETF is approved.
But critics of the financial product say Bitcoin’s volatility and possible use in illegal activities could cause significant harm to investors.
Dennis Kelleher, CEO of the nonprofit transparency organization Better Markets, co-authored a letter to SEC officials last week warning of significant risks posed by the pending approval.
“If the SEC approves the pending rule changes, it would almost certainly be a grave, if not historic, mistake that would result in significant harm to investors,” Kelleher wrote.
He added, “The massive and unrelenting fraud and manipulation in the Bitcoin market means that endorsing these products exposes investors to the very harms that the SEC exists to prevent.” he added.
Why is this important?
The cryptocurrency industry entered this year bruised after a series of high-profile bankruptcies and corporate scandals.
Sam Bankman Freed, once one of the industry’s most prominent figures, could spend decades in prison after being convicted of fraud in a federal trial. Qiao Changpeng, the founder and former CEO of major cryptocurrency exchange Binance, has pleaded guilty to federal money laundering charges and could face up to 18 months in prison. .
Government approval for a Bitcoin ETF could bring some much-needed good news to the beleaguered sector. However, as some critics fear, this financial product could widen the reach of cryptocurrencies and introduce further risks.
Analysts Manan Agarwal and Sabi Ashhar of financial services firm Morningstar wrote in August that “retail investors are wondering whether these products can gain enough traction to see the light of day, much less be convincing.” I think we should see if we can confirm the performance.”
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