This edition of TGIF 2 Minutes will make a brief attempt at summarizing Bitcoin’s recent meteoric rise to around $95,000. There is still a huge segment of the population who might ask, “$95,000 for what?”. At the same time, Bitcoin has increasingly become an accepted form of currency, although in limited and illiquid ways.
One of the more obvious and possibly over-done in the short-term reasons for Bitcoin’s price rise has been the run-up to and aftermath of the recent US presidential election. Investors seem to expect in the near future a more friendly regulatory environment for cryptocurrencies overall.
This week’s debut of options tied to a popular ETF that tracks the price of Bitcoin was also a significant factor in Bitcoin’s latest price rise.* Call options in particular increase in value when the price of an underlying security rises or is expected to rise. Options also typically trade at much lower prices than the underlying asset, possibly drawing more interest in Bitcoin and attempts to profit more cheaply from its volatility (no matter up or down in the price of Bitcoin).
Current “pure-play” Bitcoin ETFs come in a variety of types:
- those tied to the spot price of Bitcoin
- indirect exposure through Bitcoin futures (formerly the only and closest way to invest in the spot price of Bitcoin).
Other indirect ways to invest in Bitcoin are through publicly traded shares in cryptocurrency exchanges, such as Coinbase Global (COIN) and financial institutions that provide solutions to crypto-related companies, among other ways.
Sadly, there are still cryptocurrency-related scams that have been prosecuted. Recently the founder of Helix, known as a crypto mixer, was sentenced to three years in prison in US federal court after pleading guilty back in 2021. According to news reports, crypto mixers make it harder to trace Bitcoin and other crypto transactions.
Cryptocurrencies and Bitcoin have made it this far in the world of financial transactions and trading. There is a great deal more to come. Stay tuned and please report back!
*Alexander Osipovich, Reporter, WSJ. November 20, 2024.
BUYING CRYPTOCURRENCIES IS EXTREMELY VOLATILE AND RISKY.
CRYPTO EXCHANGES, CRYPTOCURRENCIES AND THE BITCOIN ETF ARE **NOT** FDIC INSURED IN ANY WAY.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied upon for, tax, legal or accounting advice.