New ETF driving bitcoin price to record highs above $65K
(Kitco News) - Bitcoin prices have pushed to new all-time highs tradingwell above $65,000 an ounce. According to some analysts, the rally in thedigital currency was spurred by the launch of the first Bitcoin ETF in the U.S.
According to Tuesday's trade data, during its inauguraltrading session, the ProShares Bitcoin Strategy ETF (NYSEArca: BITO), whichtracks CME bitcoin futures, trading 24 million shares. It was thesecond-biggest ETF debut on record.
With Bitcoin hitting a new all-time high, BITO is currentlyup nearly 8% during its second day of trading, last trading at $43.17 pershare.
With the crypto market enjoying new momentum and newmainstream attention, some investors are wondering what impact this could haveon the precious metals market. Many analysts have noted that the strong rallyin digital currencies this year has been a significant factor for gold'slackluster performance.
Currently, gold prices are struggling to push back above$1,800 an ounce. Although bitcoin has drained some momentum away from theprecious metals sector, some analysts don't see the new ETF as a game-changerfor gold.
Phillip Streible, chief market strategist at Blue LineFutures, explained that owning the bitcoin ETF is not the same as owning thedigital currency itself.
The new ETF tracks the CME's Bitcoin futures contract, whichis settled in cash. According to some analysts, BITO is a trade on the price ofbitcoin rather than the market.
"The ETF is a proxy of a proxy and that can create awhole lot of challenges for traders," said Streible. "I think youwill see a couple of days of hype and then the momentum will shift."
Mike McGlone, senior commodity strategist at BloombergIntelligence, also noted some issues with the ETF, describing it as a tool fortraders.
"The fund's ability to track spot prices will breakdown over the long term due to the costs of keeping front-month exposure --likely 10-20 percentage points a year," he said in a report Tuesday.
David Madden, market analyst at Equiti Capital, said thatthe new Bitcoin ETF gives the crypto market another level of legitimacy thatwill continue to attract more mainstream hedge funds.
However, he added that he doesn't expect it will be agame-changer for the gold market.
"The rally in bitcoin and the new ETF is not doing goldany favors right now. But the main challenge for gold right now remains thestrong U.S. dollar and rising bond yields," he said.
Colin Cieszynski, Chief Market Strategist at SIA WealthManagement, said that he also doesn't see the new Bitcoin ETF distracting andattracting investors away from gold. He added that the two alternative assetswill find an equilibrium at some point and eventually co-exist in themarketplace.
"There is no doubt that Bitcoin has siphoned somemomentum away from gold, but I wonder how long this will last. There is a coremarket for gold that will never go over to bitcoin,' he said. "But it istoo early to say what impact this new ETF will have on markets."
By Neils ChristensenFor Kitco News
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