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Bitcoin Futures ETF to Start Testing Market on Tuesday Amid Pullback Talks

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The first bitcoin (BTC) futures exchange-traded fund (ETF) to be approved by regulators in the US is said to start trading this week. And although it is only backed by “paper bitcoins” in the form of futures contracts, the ETF is still expected to serve a purpose in the market. Meanwhile, a pullback is now expected after strong BTC rally this month.

Out of the many ETF providers that have filed proposals with the US Securities and Exchange Commission (SEC), the ProShares ETF with the ticker BITO should be the first one to launch as it is said to begin trading on the NYSE Arca exchange when markets open in the US on Tuesday.

And with ETF trading set to commence, traders are not only asking themselves how the ETF will impact the spot price of bitcoin, but also who will use an ETF which does not offer direct exposure to bitcoin.

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Meltem Demirors, Chief Strategy Officer of crypto asset management firm CoinSharescalled the bitcoin futures that the ETF will be backed by “notoriously capital inefficient,” and said it “feels like the SEC is taunting the CFTC [Commodity Futures Trading Commission – the regulator in charge of the futures market].”

Others also expressed a similar sentiment, with for instance Eugene Ng of crypto exchange Gemini noting that retail investors can already buy bitcoin directly on exchanges or access it via ETFs listed outside the US, while institutions can buy BTC futures on the Chicago Mercantile Exchange. “I am still scratching my head,” Ng said.

Still, not everyone shared the opinion that a futures-backed ETF is unnecessary. Commenting on the SEC’s decision to allow the ETFs to be listed, Matt Senter, Chief Technology Officer and co-founder of the BTC rewards app Lolli, said that a bitcoin ETF could give bitcoin exposure to some people who for various reasons can’t or don’t want to hold the coins directly.

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“By allowing individuals to invest in bitcoin through ETFs that track its underlying value, investors can become familiar with bitcoin while fielding aspects of the ownership experience that may be daunting to crypto novices – such as navigating crypto exchanges, wallets, and private keys,” Senter said in an emailed comment.

And while the traders and investors wait for the launch of the highly anticipated bitcoin ETFs, the bitcoin market looks tight at the moment, according to Chief Economist at Chainalysis, Philip Gradwell. 

Writing in his latest Market Intel Report, Gradwell said that “the 30 day average of bitcoin inflows to exchanges is just 44,000 bitcoin, 30% below the 180-day average” and that institutional investors also appear to be accumulating BTC.

“Since that USD 30,000 low on 20 July, institutional investors, those holding at least 1,000 of bitcoin, have increased their holdings by 172,000 bitcoin and institutional traders have acquired an additional 68,000,” the economist said, adding that “it seems these large players took advantage of low prices to stock up.”

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And although tight supply means the market could move higher quickly, Gradwell also noted that a bitcoin ETF means less to the space today than it would have done a few years ago, given that many potential buyers have already taken the effort to learn how to trade actual cryptocurrencies. The delayed ETF has “likely led to greater crypto adoption,” Gradwell said.

“If people had just got crypto exposure from an ETF over the last few years, then the traditional financial system would be much more insulated from disruption than it currently is. As it is, millions of people are now on-boarded into crypto,” Gradwell wrote, emphasizing that this is “actual crypto,” which is a prerequisite to using DeFi and Web 3.0 applications.

As for the immediate market reaction to an ETF launch, some traders and analysts warned over the weekend that a pullback in the bitcoin price may be on the horizon. 

Speaking with CNBC on Friday, Morgan Creek Capital Management CEO and Chief Investment Officer Mark Yusko, said that he “wouldn’t be surprised” if the market consolidates for a bit instead of moving straight to USD 100,000, which he said “a lot of people” think will happen by year end. 

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“Look, we’re up 40% this month which is only 15 days old,” the hedge fund manager and noted BTC bull said, adding that the market appears “overbought” and that we could see a “buy the rumor, sell the news” type of situation.

Regardless of the price impact the new ETFs may or may not have, however, it might be that the SEC’s approval could mean trouble for at least one existing regulated bitcoin investment vehicle, namely the Grayscale Bitcoin Trust (GBTC).

It is likely that GBTC will become less attractive to investors now that an ETF exist, given the relatively high fees that GBTC is known for.

As shared by Bloomberg’s James Seyffart on Twitter on Friday, the new ETF will have a fee of 0.95%, less than half of the 2% fee charged by GBTC.

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To get around this problem and remain competitive, Grayscale has previously said it hopes to convert its GBTC to a “physical” spot ETF, backed by actual bitcoins rather than futures contracts. And with the recent approvals for futures-based ETFs, Grayscale is now taking the opportunity to move forward with a spot ETF, CNBC reported on Friday.

According to CNBC’s source, who declined to be identified because the plans were not yet public, the firm is in the process of applying for a bitcoin spot ETF, which would begin a 75-day review period where the SEC can object to the proposal.

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On Monday, Grayscale confirmed that they will file for GBTC to be converted into an ETF.   

In terms of this week’s first ETF listing, there has been some uncertainty as to whether the launch day will be Monday or Tuesday. But according to Bloomberg’s senior ETF analyst Eric Balchunas, BITO will indeed launch on Tuesday as the first bitcoin futures ETF.

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Tomorrow morning, ProShares will launch its ETF on the New York Stock Exchange, the firm and the exchange told The New York Times.

If the SEC still takes no action to stop the launch of the ETFs, the next ETFs in line to be listed would be either the Invesco Bitcoin Strategy ETF or the Valkyrie Bitcoin Strategy ETF, Bloomberg Intelligence analyst James Seyffart indicated before the weekend.

“Valkyrie [is] almost certainly going to begin trading next week,” Seyffart said, explaining that it has filed the necessary paperwork to be registered for trading on an exchange. He added that he is still waiting to hear from Invesco, which “could” also launch an ETF the same week.

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Source: Bloomberg

AT 12:16 PM UTC, bitcoin traded at USD 61,180, almost unchanged over the past 24 hours and up by 12% over the past 7 days. However, bitcoin still outperformed all other coins in the top 10 by market capitalization today, with the exception of dogecoin (DOGE), which rose by 8% in a day and 12% in a week.

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Bitcoin Senator Rallies For Support Against Powell’s Renomination As Federal Reserve Chair, Here’s Why

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Popular Bitcoin Senator, Senator Cynthia Lummis is reportedly soliciting for the support of her fellow Republicans in her stance against Jay Powell after the latter got renominated to chair the Federal Reserve.

Bitcoin Senator Wary of Crypto-unfriendly Nominees

As reported by Decrypt who first broke the news, a source in Lummis’ office says her reasons border on her belief that there is an unlawful treatment of crypto-based institutions in her home state, Wyoming.

Meanwhile, the Bitcoin senator is not only against the nomination of Powell. The source still claims that Senator Lummis is also asking her Republican colleagues to help block Leal Brainard’s nomination as well. Brainard is another nominee of President Biden’s for the Fed positions.

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Lummis’ skepticism might be as a result of the Special Purpose Depository Institutions or SPDIs as they are otherwise called. They are a new type of crypto-based bank that Wyoming lawmakers granted a special operational license to, just last year.

Two crypto-based companies that received the license in 2020 include Kraken exchange and Avanti — the stablecoin issuer. However, the Federal Reserve’s decision to not approve their applications for central bank-issued accounts has placed a hold on their banking ambitions.

Speaking about the Federal Reserve’s delay in a Wall Street Journal feature article by Lummis on Wednesday, she says it is an intentional and unlawful obstruction. She added that the Fed’s reasons are ambiguous at best. According to the Bitcoin Senator, Lummis claimed that the Wyoming entities have met all requirements for being a bank under the Federal Reserve Act.

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Lummis insists that Powell and Brainard are only avoiding their legal obligations in their continued treatment of SPDIs and like many other U.S lawmakers, she wants to know why.

Could Lummis’ Pressure Affect Powell’s Confirmation?

As Lummis continues to apply even more pressure on her colleagues, the possible extent to which this pressure can truly go in affecting the confirmation process of both Powell and Brainard, remains to be seen.

But with the chair of the Senate Banking Committee, Sherrod Brown, reportedly holding a vote on the pair sometime this month, both of them could be confirmed.

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Also, there’s a possibility of a potential tight vote now that some progressive Democrats — most notably Elizabeth Warren — are saying they will not be voting for Powell.

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PlanB’s Floor Model First Miss: Bitcoin Price Closed Way Below $98K In November

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PlanB’s floor model was wrong about BTC’s November closing price. The stock-to-flow model, though, is still on track.

Bitcoin’s closing price for November below $60,000 meant that PlanB’s floor model, which was particularly accurate until now, was finally broken.

At the same time, though, the analyst confirmed that the more popular stock-to-flow model was still valid as BTC is on track towards $100,000.

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PlanB’s Floor Model Fails

PlanB is among the most popular analysts in the cryptocurrency space, predominantly known for the Bitcoin stock-to-flow model, which he published in early 2019. However, he also posted another model, which he referred to as the “worst-case scenario,” in July this year.

Also known as the floor model, it’s based on technical aspects, such as the 200-day moving average, and saw BTC closing August at $47,000, September at $43,000, and October at $63,000.

The first two months were spot on. BTC closed in October at $61,000, which was still very near to the model’s predicted price, and PlanB said it was “good enough” for him.

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However, November’s closing actual closing price of way below $60,000 was quite different from what the model envisioned – $98,000. As such, the analyst admitted that this was the model’s first miss after nailing the previous few months.

S2F on Track

As mentioned above, the floor model works separately from the stock-to-flow model, which sees the stock as the size of existing reserves (or stockpiles) and the flow as the annual supply of new bitcoins to the market.

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It’s actually even more bullish as the original version sees bitcoin tapping $100,000 by the end of the year. The upgraded stock-to-flow cross-asset model, which introduced different phases of bitcoin’s development, predicted a price tag of $288,000 until 2024.

Although bitcoin still struggles below $60,000 at the time of this writing, PlanB believes that the original S2F hasn’t been broken as the asset is on its way towards $100,000. If BTC is indeed to go into a six-digit price territory, it would have to increase its USD value by more than 66% in the next 30 days.

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CashApp Added Bitcoin Taproot Support, Here’s Why It Is Important

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CashApp now supports the updated version of Bitcoin

The widely known Cash App mobile payment service developed by Square, which is being used to transfer money with the usage of a mobile app, now fully supports the Bitcoin taproot update.

The mobile payments service is currently available in the U.S. and the U.K. but is still reporting 70 million annual transactions between users and generating $1.8 billion in gross profit.

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The taproot upgrade was highly anticipated by the Bitcoin network and the cryptocurrency community in general. Previously, the update went into effect on Nov. 14, 2021, at block 709,632.

Previously, the announcement appeared on the app’s website that has described numerous benefits that users will experience after the implementation of the update. One of the main advantages is increased privacy and reduced transaction fees.

The two-week period has been chosen to confirm the functionality of the updated version of the currency. As for now, the update has been activated for all customers. Taproot-enabled wallets are now available for both receiving and sending.

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