ETFs on the Horizon - Gold all over again?

meno (74)in #cryptocurrency • 6 years ago (edited)

Some are drawing some parallels here and I don't blame them. In truth as different as markets may be, human psychology is probably the main constant we could or should be attempting to analyze. However, the way the gold market behaved, does seem curiously similar.

img src I realize there are more than a few Steemians that read these headlines and have little clue as to what it is, or what it could mean. After all ETF's are a common product of the stock market and something completely alien to the cryptosphere. It's not incredibly hard to find information about it, but as with many other things of the financial world, some of the descriptions are heavy handed on the wording.

Investopedia

A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold.

The simplest explanation I could give someone who is not interested in learning about these financial products is a lot simpler. Think of an pool of investment, many companies, many investors, getting their funds together into one common pool. The ownership of this pool is split into shares, and these are traded in the same way all stocks are.

This simple shift would allow traditional investors, like the ones who deal with Ameritrade or E*Trade for example, to invest in cryptocurrencies without having to learn wallets, encryption, ledgers and all the technological challenges most investors on the world stage have absolutely no interest in learning. (at the moment that is)

More Liquidity

The logic here is very simple. The more people who engage on a market, the more liquid the market is effectively. On ramps for crypto like Coinbase, Gemini and possibly Bittrex in the near future are possibly not enough to service the whole world. Competition, and ease of access are things absolutely necessary for cryptocurrencies to reach mass adoption.In simple terms the two upcoming ETFs would allow absolutely anyone comfortable with buying stock, to participate of Bitcoin painlessly.

Less volatility

This assessment is possibly more speculative, but the argument is sound. Normally in traditional investing there is a heftier number of long term investors over the short speculative day traders. Hopefully this modus operandi would continue to be so even when it enters the extremely volatile world of cryptocurrencies.

We can also assume other financial products will be developed to facilitate long term investing. But of course at the moment options or other common products one would expect are not being discussed.

The comparison to Gold

Is very interesting to me, because if you do some digging some of the challenges gold had to endure prior to its "bull run" are very similar to what Bitcoin is facing with today.

Before Gold's ETF launch many traditional investors sat on the sidelines waiting for it to get easier. They could buy gold, store it and what not, but the cost of storage, transport and even knowing where to buy was a market for people who really wanted to become specialists. Drawing the parallels is not hard at all, wouldn't you say?

I'm sure there will be people on both sides of the conversation, those who like me are feeling pretty good about this, and those who are upset regulation is sure to creep up some more. However, anyone who transacts in honesty should be able to recognize the potential of the shift.

Here is to hoping....

ETFs on the Horizon - Gold all over again?

Investopedia

More Liquidity

Less volatility

The comparison to Gold

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