Former Goldman Sachs executive Raoul Pal is comparing Bitcoin to social media giant Facebook with the idea that the king crypto is a network of money.
In a new interview with Outlier Ventures, Pal says Bitcoin is Facebook on steroids because it allows users to enjoy both the benefit of the network and the value of it at the same time.
“In the past, Facebook had shareholders and users. The users got the benefit of the network. The shareholders got the benefit of Metcalfe’s Law – the value of the network, and as a user, you didn’t get that at all really.
Then Bitcoin comes along, and it’s basically the world’s best behavioral incentive program… We’re going to create a network of money, and the more people you bring into the network, the more it goes up in value. We’re going to build applications on it, so it’s not a Ponzi scheme. It’s actually something you can build on.
This is perfect for humans. We’re going to go crazy on this stuff because we’re all incentivized. We’re all network users and owners at the same time. It’s like every person on Facebook being given Facebook shares. It’s amazing.”
Pal explains why Bitcoin’s valuation solely relies on the growth of its network.
“It’s all about network adoption. Everything else is kind of noise in the middle. Once you understand network adoption is everything – and we talked about it earlier on about this 113% growth rate – you understand and you can apply that to everything in the crypto space and in the metaverse space. You’re just looking for adoption. Anybody’s who’s trying to value stuff on cash flow or anything else is barking up the wrong tree.”
First Bitcoin ETF in Immediate Danger of Hitting Cap on Contracts Held
The first bitcoin (BTC) futures-backed exchange-traded fund (ETF), ProShares’ BITO, is reportedly already in danger of breaching a limit on the number of futures contracts it is allowed to hold under current Chicago Mercantile Exchange (CME) rules.
BITO already owns nearly 1,900 bitcoin futures contracts expiring in October, according to Bloomberg data. The number is close to CME’s current rule that a single entity cannot own more than 2,000 front-month futures contracts, Bloomberg reported on Thursday, when BITO had only been live for two full days.
To get around the limit, the ETF has reportedly started buying futures contracts expiring in November in addition to the October contracts it holds, with 1,400 November contracts amassed so far. At the current pace, however, the fund could also soon reach CME’s cap on holdings for next-month contracts of 5,000 contracts, per the report.
And while the CME has already said it will increase the limits to 4,000 front-month contracts starting in November, this is also likely to be reached soon by BITO, which already has more than USD 1bn under management.
A major issue faced by ProShares’ ETF is that futures contracts tend to trade at a higher premium over spot prices the further away their expiry date is – a phenomenon known as contango in the futures market.
As such, choosing to get around the maximum limits by buying longer-dated contracts will mean the ETF has to get its bitcoin exposure at prices that are increasingly higher than spot. This could result in high costs when contracts are rolled over at expiry that will eventually be paid by the ETFs investors in the form of lower returns.
According to Bloomberg’s own ETF expert, Eric Balchunas, some of the pressure on the first ETF to be launched could be alleviated by competing ETFs coming to the market over the next few days and weeks. However, the first-mover advantage that BITO has gotten will still be difficult to challenge, he said.
“The unprecedented early volume in BITO makes it like a snowball rolling downhill, as liquidity and assets begets more liquidity and assets,” Balchunas said, adding that it will be “nearly impossible” for other ETFs to steal significant volume from BITO in the short or medium-term.
Commenting on the possibility of the ETF running into the ceiling, some speculated that the extreme popularity of the futures ETF could eventually pressure the US Securities and Exchange Commission (SEC) to allow a “physically” backed spot bitcoin to launch.
That scenario was suggested by Zhu Su, CEO of crypto hedge fund Three Arrows Capital, saying that it could lead to the ETF rising to a “hilarious premium,” leading the SEC to “approve a spot ETF because of public outrage.”
In a tweet, he also shared a comment from Max Boonen, Founder of electronic market maker B2C2, saying that it is “doubtful” that clearing houses will be comfortable with a single entity holding more than 4,000 front-month contracts.
“What happens when BITO surpasses 4k [contracts] as it surely will?”, Boonen asked.
So what if BITO halts creations bc hits CME OI limit, BITO spikes to hilarious prem, SEC rushes to approve spot ETF bc of public outrage, btc $1m, wyd https://t.co/1c5mRlg46j— Zhu Su 🔺 (@zhusu) October 21, 2021
A similar idea was also suggested by Eric Balchunas, saying in the Bloomberg report that BITO hitting the limits on how many futures contracts it is allowed to hold could pressure the SEC to allow a spot-based bitcoin ETF.
“That certainly would do the trick in slowing down BITO and providing a release valve for futures demand,” the senior ETF analyst said.
Meanwhile, the second bitcoin ETF to be approved by the SEC, the Valkyrie Bitcoin Strategy ETF with the ticker BTF, is scheduled to go live on the market today, October 22. BTF will also be backed by bitcoin futures contracts traded on the CME rather than by “physical” bitcoins.
BTF should go live on the Nasdaq exchange when the market opens at 09:30 ET (13:30 UTC).
Following the launch of Valkyrie’s fund today, a third bitcoin futures ETF, the VanEck Bitcoin Strategy ETF (XBTF), is set to go live on Monday on the Cboe BZX Exchange, according to a recent SEC filing.
Second US Bitcoin Futures ETF Launching Today – Here Are the Details
A new Bitcoin (BTC) futures exchange-traded fund (ETFs) rolls out today.
Valkyrie Investments, an alternative asset management firm, is launching the country’s second Bitcoin futures ETF, according to CEO Leah Wald.
The new product is called the Valkyrie Bitcoin Strategy ETF and will trade on the Nasdaq under the ticker symbol BTF.
The launch comes on the heels of ProShares’ Bitcoin futures exchange-traded fund, which exploded onto the market on Tuesday with the second-biggest ETF launch of all time.
Like ProShares’ Bitcoin Strategy ETF (BITO), the Valkyrie ETF doesn’t invest directly in BTC but provides price exposure to Bitcoin futures contracts.
Per the ETF’s prospectus,
“Under normal circumstances, the fund will seek to purchase a number of Bitcoin futures contracts so that the total notional value… of the Bitcoin underlying the futures contracts held by the fund is as close to 100% of the net assets of the fund as possible.”
Bitcoin is trading at $62,793, up nearly 10% on the week but down from its Wednesday all-time high of $67,276, according to CoinGecko.
Bears Gearing up to Drag Bitcoin Down, This Is How BTC Price Can Defend Itself!
The cryptocurrency market remains vivid lately. While some flourish, others lose out-breath on their run. The market cap of the crypto space at the press time, is down by 1.7%, at $2,718,182,571,073. While the volume for the last 24-hours hovers around ~$166,723,949,932.
The star crypto at press time is trading at $63,624.08. With negative gains of 2.5% for the last 24-hours. While the market capitalization of BTC floats around $1,199,369,171,403. The trading volume for round-the-clock stood at around $44,244,433. The dominance stands at around 44.1%. The coin has been consolidating post-brushing its new ATH at $67,276.79, which was on the 20th of October.
Bitcoin to Lose Its $60,000 Levels?
According to an analyst, BTC grew from $41,000 to $67,000, without any notable corrections. From the chart, BTC price can be seen moving across the rising channel. The star coin had earlier rebounded each time it hit the support levels of the rising channel. However, this time around the coin broke through its support levels. And now holds two probabilities for its price action.
The analyst anticipates the coin to either retest and plummet towards its support levels. Or it might take a dip straight away towards its support level at $59,000. However, the analyst expects BTC to march towards its milestone in the range of $78,000 to $80,000. Following the price correction. But in no terms, it means a bear trap.
Collectively, a price correction seems to be imminent, prior to a major leg-up. As a lot FOMO has also crept in during the uptrend. Which might need correction, for a healthy run in the quarter. Hopefully, the star coin retraces, its path surpassing the expectations.