Today, Robert Swarthout joins Casey Smith to talk about new ETF launches. Robert will be joining us once a month to talk about Digital Assets. There has been a lot of positive movement when it comes to Bitcoin. In the past few months, it has almost doubled, so where is Bitcoin headed?
Bitcoin is doing well in the market, but it is a high risk investment. It’s a new asset class and it isn’t regulated. People love to talk about all the money they have made but they don’t like to talk about how much they have lost. It’s important to know and understand what you are buying.
There is a new digital house that someone created that you can purchase with bitcoin that is going for hundreds of thousands of dollars. There is digital art that is going for millions of dollars. This creates a whole new market of goods. Essentially, it is trading digital baseball cards that are block-chain encoded to belong to you. NFTs are currently all about art – when it becomes about car titles, voting, house deeds it will really take off.
ProShares Bitcoin ETF
In this fund, you are not actually owning bitcoin. You are buying BITO from ProShares. You don’t actually own any bitcoin; you own futures contract to buy bitcoin in the future. But since the fund was set up by the 1940s Act, this ensures that you will never actually own Bitcoin. Therefore, there is risk. It’s called contango. Everyone wants a bitcoin ETF that actually owns bitcoin, but it does not exist yet. This fund will likely hedge the way for that.
Learning the Value of Digital Assets
We are slow to add bitcoin to portfolios because there is a high risk and we are still learning the true value of digital assets. It’s easy to feel greedy or have FOMO about Bitcoin. What is the psychology of adding bitcoin to a portfolio? The market wants a bitcoin ETF and we still don’t have it – we have a bitcoin futures ETF and the futures ETF may not trade like bitcoin itself. It’s still to be seen.
El Salvador and Bitcoin
El Salvador recently announced that bitcoin could officially be a currency in their country. They have started mining their own bitcoin with energy produced from their bitcoin. The bitcoin use within the country has been muted because they don’t have it easily available for their citizens just yet. It’s important to understand that El Salvador is not leading edge in bitcoin. Their currency is so volatile that bitcoin could be a more stable option for them.
Narrative around Digital Assets
Digital assets are absolutely picking up steam. There is no regulation around it yet and some senators are beginning to take strides for it. The narrative is changing because people are interested in talking about it.
The SEC an Ripple Situation
In this case, Ripple was selling XRP as a security. The basis of this case is that Ripple had a headquarter in the US and did not register XRP as a security. They didn’t register it because they don’t see themselves as a security, they see themselves as bitcoin. Bitcoin is not located anywhere. This case is so fascinating because while the SEC is protecting the investor through this suit, investors that purchased XRP want Ripple to win.
Digital Asset Regulation
Who regulates it? Congress needs to set up some structure. Some are calling for a new organization to regulate bitcoin specifically that is set up by Congress. Currently, there is a lot of grey area that needs to be cleared up regarding digital assets and regulations.
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