Asia’s first inverse bitcoin exchange-traded fund (ETF), designed to allow investors to profit from a decline in cryptocurrency values, will launch in Hong Kong on Tuesday. The CSOP Bitcoin Futures Daily (-1x) Inverse Product, introduced by CSOP Asset Management, will debut on the Hong Kong Stock Exchange.
The new ETF aims to capitalise on the increasing demand for investment opportunities linked to volatile cryptocurrencies. After a batch of spot crypto ETFs launched in Hong Kong in April, bitcoin experienced a turbulent second quarter, falling over 12%. The inverse ETF allows investors to benefit from bitcoin’s price drops.
Bitcoin has been notably volatile, with its fluctuations in 2023 surpassing those of crude oil and the Nasdaq 100. Recent weeks saw a rebound in bitcoin’s value, trading around $67.400 following political developments in the US.
CSOP’s inverse bitcoin product will track the daily inverse performance of the S&P Bitcoin Futures Index. CSOP, which introduced Asia’s first bitcoin futures ETF in 2022, saw its market value rise to over $100 million earlier this year but has since decreased to approximately $58 million.
Bitcoin surged to a two-week high on Monday following the attempted assassination of US presidential candidate Donald Trump. Trump, who was shot in the ear during a rally in Pennsylvania, is recovering well, according to his campaign. The attack is seen by some investors as boosting his chances of winning the upcoming election, leading to increased trades betting on his victory.
The cryptocurrency saw an 8.6% rise, reaching $62,508, with a session high of $62,698, marking a 47% annual gain. Ether also experienced a boost, climbing 6.8% to $3,322. Trump has criticised Democratic efforts to regulate the crypto sector and positioned himself as a pro-crypto candidate, which has resonated with the market.
Market analyst Tony Sycamore from IG noted that the assassination attempt has significantly bolstered Bitcoin, adding that the cryptocurrency could see further gains. Trump is set to speak at the Bitcoin 2024 conference in Nashville on 27 July, a move likely to keep the crypto market’s focus on his campaign. Despite a rocky start to July, Bitcoin’s recent rebound suggests it could approach $65,000 by the end of the week.
Bitcoin experienced a significant drop to a two-month low recently, driven by uncertainty surrounding the US presidential elections and the impact of supply from a defunct Tokyo-based crypto exchange. The cryptocurrency fell over 2% to $57,843, its lowest since 2 May, marking a loss of more than 6% this week.
The market has been under pressure, particularly after the first debate between US presidential candidates Joe Biden and Donald Trump, which raised concerns about potential candidacy changes that could affect crypto policies. Market analyst Josh Gilbert from eToro highlighted the speculation that a new candidate might not be as crypto-friendly as Biden.
Bitcoin had surged earlier in the year, reaching a record $73,803.25 in mid-March following the US exchange-traded funds launch. However, the cryptocurrency has since lost over 21% of its value. Political uncertainties in France and Britain and the changing dynamics of the US election have contributed to this decline.
In addition, reports that Mt. Gox, a former leading crypto exchange, is repaying its creditors have created anticipation that these creditors might sell their bitcoins, further impacting the market. Despite the current downturn, some analysts, like Tony Sycamore from IG, believe that bitcoin could still retest its March highs and reach up to $80,000. Meanwhile, Ether also declined, trading over 1% lower at $3,213 and down more than 22% from its mid-March highs.
Former US President Donald Trump has made a declaration, stating that he wants all remaining Bitcoin to be mined within the United States. The announcement, made on June 12, 2024, is the latest in a series of controversial statements from Trump, who has previously expressed skepticism about cryptocurrencies.
Trump’s proclamation comes at a time when Bitcoin and other cryptocurrencies are facing increased scrutiny from governments and regulatory bodies worldwide. The former president emphasised the need for the US to control Bitcoin mining operations to ensure the country’s dominance in the digital currency market and to safeguard national security.
Bitcoin mining is the process by which new bitcoins are created and transactions are verified on the blockchain. Miners use powerful computers to solve complex mathematical problems, which, in turn, secure the network and validate transactions. That process requires significant computational power and energy resources. Currently, the majority of Bitcoin mining operations are concentrated in countries like China, Russia, and Kazakhstan, where electricity is relatively cheap. However, the geopolitical tensions and concerns over the environmental impact of Bitcoin mining have prompted calls for a shift in mining operations to more stable and regulated regions.
The cryptocurrency community has had mixed reactions to Trump’s statement. Some industry leaders welcome the idea of increasing Bitcoin mining operations in the US, citing the potential benefits of regulatory clarity and increased investment in renewable energy sources. They argue that the US has the technological expertise and infrastructure to support large-scale mining operations sustainably. However, others express concern over the potential for increased government intervention and regulation in the cryptocurrency space. They fear that such measures could stifle innovation and contradict the decentralized spirit of Bitcoin and other cryptocurrencies.
Why does it matter?
Trump’s rationale for wanting Bitcoin mining to be relocated to the US centers around three main points – economic opportunity, national security, and technological leadership.
Economic Opportunity: Trump argues that bringing Bitcoin mining to the US would create jobs and stimulate economic growth in the tech and energy sectors. By harnessing the country’s technological infrastructure and renewable energy sources, he believes the US could become a global leader in cryptocurrency mining.
National Security: By controlling Bitcoin mining operations, Trump asserts that the US can prevent foreign adversaries from leveraging cryptocurrencies for illicit activities, such as money laundering and financing terrorism. He also contends that having a significant portion of the global Bitcoin supply mined domestically would enhance the country’s financial stability.
Technological Leadership: Trump envisions the US leading the world in blockchain technology and digital currencies. By fostering a robust Bitcoin mining industry, he believes the country can spur innovation and set global standards for cryptocurrency regulation and adoption.
The most popular cryptocurrency, bitcoin, experienced a rally in price during the last two weeks. Contrary to some predictions, approval of the Exchange Traded Funds (ETF) in the United States pushed the request for the cryptocurrency, creating the cycle in which the bitcoin price went up in a short time. The previous all-time high price traded for one bitcoin was $69.000 back in November 2021. The bitcoin is now traded above the $67.000
Back in January, the US Securities and Exchange Commission (SEC) approved the first bitcoin ETF after seven years since the first request. The SEC granted 11 ETFs and some of the biggest financial firms and institutional investors announced that their ETF was a success. The SEC’s decision made a clear path for institutional investors to offer bitcoin as an investment to its customers.
Having in mind the number of bitcoins consumed by the ETFs daily, and considering that the bitcoin mining industry can produce around 900 bitcoins per day, the demand for bitcoins continues (and will continue) to grow. It is important to mention that, regardless of the large demand, the bitcoin creation can not be hurried up or anyhow ramped up. Bitcoin has a set emission (fixed supply) which is planned and embedded into the consensus mechanism that underlays cryptocurrency.
Another event, also embedded into the bitcoin protocol, played a significant role and will continue to do so in forthcoming days. In approximately 48 days (mid-April 2024) bitcoin will have another ‘halving’ event. That is a planned reduction of the reward for miners in the form of newly minted coins. At this moment, the reward for miners who find a valid bitcoin block is 6.25 bitcoins. After the next halving, the reward will drop to 3.125 newly created bitcoins per block. This will reduce the number of daily minted bitcoins to around 450, creating even more pressure on the demand side, hence a possible new time-high valuation for the bitcoin. The halving occurs once in four years and it has influenced the price of bitcoin throughout its history. No reason to believe it will be different this time.
In its statement, the SEC stated that the granting of the bitcoin ETF does not mean that the SEC is promoting the cryptocurrency and called for individual investors to be cautious when they invest in digital assets.
What is the exchange-traded fund?
Invented back in the 1990s, exchange-traded funds are baskets of bonds or other assets that are usually managed by the leading financial investment firms. They can be traded on the stock exchanges and, therefore, realise gains and losses from trading. They are invented as a platform for the individual investors to participate. By investing in several assets and diversifying its portfolio, individual investors reduce the chance for significant losses.
Why is the bitcoin exchange-traded fund important for digital assets?
Considering that cryptocurrency use and safe storage still require certain technical knowledge, the ETF offers the opportunity for individual investors to invest directly in the cryptocurrency markets without the risk associated with cybersecurity. The bitcoin exchange-traded fund opens the way to invest in digital assets managed by professionals. From eleven companies that applied for the SEC approval, there are some Wall Street financial giants such as BlackRock or Van Eck but also a new wing of the crypto and innovative tech industry such as Fidelity or Ark Investments. Together, they manage hundreds of billions of dollars that will now be exposed to the cryptocurrency market. The ETF will follow the spot price of the bitcoin cryptocurrency, and may benefit the price stability of bitcoin. It will also serve as a safeguard for individual investors from the industry known for its many blunders
The SEC announcement comes one day after the security incident related to their X account. In the alleged hack, shared content was news that the SEC approved spot bitcoin exchange-traded fund. Was this a message that went public by accident or mistake from the account holders? Or was it a malicious act from the third party to undermine the government agency? Answering this question will be the primary purpose of the FBI investigation announced yesterday by the Securities and Exchange Commission
The importance of security of the channels for digital communication from the government was proven again in the case of the X account hack yesterday. The official US Securities and Exchange Commission account on the X social network posted a message yesterday announcing that the government agency approved the first-ever bitcoin exchange-traded fund (ETF).
This text, alongside the statement of the US SEC chair Gary Gensler, was posted on the official channel for a few minutes and then deleted. In reaction to this event, Gary Gensler’s X account posted a message claiming that the official SEC account was hacked and that the SEC had not approved the bitcoin ETF.
Anyhow, this unfortunate mistake took a high financial toll. The US SEC has been under the spotlight recently for the decision around the first-ever bitcoin exchange-traded fund in the US. This decision has long been awaited in the markets, as ETFs are a form of financial product that can be traded on stock exchanges, attracting much attention from the finance and trading industry. The industry believes that ETFs will open the door to massive investments in the cryptocurrency markets. Bitcoin ETF would allow the most prominent investment companies to allocate some of their funds to buy and store cryptocurrency.
The fake message posted yesterday on X launched the bitcoin price in minutes. A message sent by the SEC chair about the account hack crashed the whole market back in a swift reaction. It is estimated by experts that investors’ losses were enormous in this wild price volatility.
The X company security team announced in the report immediately after the accident that the SEC account was compromised. They clarified this was not due to X’s vulnerability but rather through controlling the phone number associated with the account. The X’s security team pointed out that the SEC account did not enable two-factor authentication.
This account hack is particularly interesting, considering that the SEC was suing X’s CEO Elon Musk earlier for market manipulation through the messages posted on the social media website.
Some US Senators sitting on the Senate Banking Committee reflected on the news, demanding clarity around the government agency’s social media account hack.
Just like the SEC would demand accountability from a public company if they made such a colossal market-moving mistake, Congress needs answers on what just happened. This is unacceptable. https://t.co/tWtLqHtqpu
Earlier in May, the Congress of the state of New York drafted a bill that would ban bitcoin mining in the state of New York. Yesterday, on June 30th drafted bill passed the floor of the New York State Senate, and will become the law. With this new law, the bitcoin mining, or any other ‘cryptocurrency mining operations that use proof-of-work authentication methods to validate blockchain transactions’.
In order to participate in bitcoin network security, bitcoin miners solve the cryptographic problem (called ‘target’) and provide the proof-of-work result. The first one who submits the correct answer, claims the award in a form of a newly minted bitcoins.
Bitcoin mining machines, are specialized computer graphic cards ASIC (which stands for Application-Specific Integrated Circuit) that consume a lot of electricity. Even the smallest ones are more powerful than several personal computers joint together. The amount of electricity needed for the mid-to-full size mining operation is almost the same of the amount used for powering massive computer data centers. This, of course raised a lot questions related to the environmental impact of the cryptocurrency mining.
In the US, and other parts of the world, concerns are growing around the bitcoin mining industry. Miners are utilizing the alternative sources of energy, as more and more countries are charging bitcoin miners an expanded price for electricity. Miners have been particular efficient making deals with the oil and gas companies, as they use natural gas and byproducts of oil drilling.
