Something important is about to happen and you want to buy Bitcoin before it does. There are three firms in the running to have the first Bitcoin ETF launched. The Bitcoin Investment Trust (OTCQX:GBTC) filed to get listed with the SEC. Winklevoss Capital Management LLC has been trying to obtain approval for their bitcoin ETF (Pending:COIN) since 2013 with a possible SEC decision in March. Finally, SolidX Partners Inc. is seeking a listing as well. It matters a great deal for these parties who will be first but we don't care. What matters is a Bitcoin ETF may go live in 2017 or 2018.
Ten years ago, you heard about gold, people talked and got emotional about it, but you couldn't buy it readily. It is widely acknowledged that the launch of gold ETPs has had a very significant impact on the gold market and is now a key part of it. We have witnessed a decade of growth, and despite some predicting the end of the gold bull market, I think the next decade has a lot more to go.
Graham Tuckwell, founder of ETF Securities
There are interesting similarities between gold and Bitcoin. Bitcoin sure gets talked about and people get emotional about it. Bitcoin is very volatile:
Something gold used to be as well:
Gold Price in US Dollars data by YCharts
The chart above shows the gold price index as measured in U.S. dollars swinging wildly up and down. Then something important happened. The SPDR Gold Shares ETF (NYSEARCA:GLD) launched Nov. 18, 2004. It could be a coincidence that's when gold started a pronounced ascent. The graph below shows the price appreciation of the GLD ETF:
In 2011, the GLD ETF became the largest ETF in the world with over $70 billion of AUM.
Specialized funds are providing access to Bitcoin like The Bitcoin Investment Trust, which trades over the counter. There are two ETN products called Bitcoin Tracker One and Bitcoin Tracker Euro available through the NASDAQ/OMX in Stockholm, but owned by Jersey based Global Advisors. But there is no large scale, simple and trustworthy vehicle to trade Bitcoin yet. The demand is there:
we rapidly sold essentially every available slot in the fund.
-Horizon Kinetics Murray Stahl about launch of private Bitcoin fund
It appears there is significant pent-up demand from the investment public for such a vehicle
-Needham analyst Spencer Bogart
It can be hard for some investors to access the bitcoin market
-Daniel Masters, Global Advisors
What would happen if the entire market cap of all Bitcoin would become equal to the value of the GLD ETF at its 2011 peak?
It would go up to $3,333 per Bitcoin assuming
the maximum number of Bitcoin possible being mined. Here are some other benchmarks for Bitcoins value:
Image: 1-15-2017 by author (use it freely, but please link back)
It's not my prediction Bitcoin will go to $3,333 or whatever. I'm observing it is obvious that it's possible. Bitcoin and the blockchain are useful, people get emotional about them, markets are a complex adaptive system and a focused ETF could be launched in 2017 or 2018. The downside is a total loss of investment while the upside is a multiple of investment.
It seems to be a good time to have a little bit of exposure. I hold mine at U.S. based wallet Coinbase, use my invite for a $10 Bitcoin bonus, but there are many others like Coinspace or Bitgo.
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Disclosure: I am/we are long SOME BITCOIN AND IAU.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
