As the year 2023 comes to an end, the crypto market is facing a downward pressure from investors who are taking profits or cutting losses. The leading crypto stocks, such as Coinbase, MicroStrategy, and Square, have all seen significant drops in their share prices on the last trading day of the year.
Coinbase, the largest crypto exchange in the US, closed at $180.23, down 8.7% from the previous day. The stock has lost more than 50% of its value since its debut in April, when it reached a peak of $429.54. Coinbase has been struggling with regulatory uncertainty, competition from rivals, and technical issues that have affected its platform.
MicroStrategy, the business intelligence firm that owns more than 100,000 bitcoins, ended the day at $379.12, down 9.4%. The stock has fallen more than 70% from its all-time high of $1,315.00 in February. MicroStrategy has been one of the most vocal and aggressive advocates of bitcoin, but its heavy exposure to the volatile asset has also made it vulnerable to market swings.
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Square, the payments company that also offers crypto services, closed at $139.45, down 7.6%. The stock has declined more than 40% from its record high of $283.19 in August. Square has been expanding its crypto offerings, such as launching a bitcoin hardware wallet and a decentralized exchange, but it has also faced challenges from regulators and competitors.
The crypto market as a whole has also suffered a sharp correction in the last quarter of the year, after reaching new highs in October and November. The total market capitalization of all cryptocurrencies has dropped from over $3 trillion to below $2 trillion, according to CoinMarketCap. The main factors behind the sell-off include rising interest rates, regulatory crackdowns, hacking incidents, and environmental concerns.
Despite the gloomy outlook, some analysts and experts remain optimistic about the long-term prospects of the crypto industry. They argue that the fundamentals of crypto are still strong, and that the adoption and innovation will continue to grow in the coming years. They also point out that crypto has historically performed well in January, after a period of consolidation and correction.
Coinbase says its ready for first Spot Bitcoin ETF in the USA
Coinbase, the largest cryptocurrency exchange in the US, has announced that it is prepared to launch the first spot bitcoin exchange-traded fund (ETF) in the country. A spot bitcoin ETF would allow investors to buy and sell shares of a fund that holds actual bitcoins, rather than futures contracts or other derivatives. This would provide more direct exposure to the price movements of the leading cryptocurrency, as well as lower fees and risks.
Coinbase said in a blog post that it has partnered with Invesco, a leading investment management firm, to create the Invesco Coinbase Bitcoin Strategy ETF. The fund would track the Coinbase Bitcoin Index, which measures the performance of bitcoin based on the prices and volumes on Coinbase’s platform. Coinbase would act as the custodian of the fund’s bitcoins, ensuring their security and compliance.
The announcement comes amid a surge of interest and demand for bitcoin ETFs in the US, following the approval of several futures-based bitcoin ETFs by the Securities and Exchange Commission (SEC) in October. However, many experts and investors have argued that spot bitcoin ETFs would be more beneficial for the market and the investors, as they would eliminate the complexities and costs of dealing with futures contracts, such as rollover, contango, and margin requirements.
Coinbase said that it believes that spot bitcoin ETFs are “the next logical step” in the evolution of the crypto industry, and that it is ready to work with regulators and partners to bring them to market. The company also said that it plans to offer more products and services that would enable investors to access and participate in the crypto economy.
“We are excited to partner with Invesco to bring this innovative product to investors,” said Brett Tejpaul, Head of Institutional Sales, Trading, Custody and Prime Services at Coinbase. “We believe that spot bitcoin ETFs will provide a more efficient and transparent way for investors to gain exposure to bitcoin, and we look forward to launching the first one in the US.”
Whether crypto will bounce back or continue to slide in 2024 remains to be seen. For now, investors and traders are bracing for more volatility and uncertainty in the crypto space.
Even if USA gets its bitcoin ETF, success isn’t guaranteed
Many cryptocurrency enthusiasts have been eagerly awaiting the approval of a bitcoin exchange-traded fund (ETF) in the US, hoping that it will boost the adoption and legitimacy of the digital asset. However, even if the Securities and Exchange Commission (SEC) gives the green light to a bitcoin ETF, there is no guarantee that it will be a success.
A bitcoin ETF is a type of investment product that tracks the price of bitcoin and allows investors to buy and sell shares of it on a regulated stock exchange. Unlike buying bitcoin directly from a crypto exchange or a wallet, a bitcoin ETF would offer more convenience, security, and transparency to investors, as well as lower fees and taxes.
However, a bitcoin ETF also faces several challenges and risks that could limit its appeal and performance. Here are some of them:
Regulatory uncertainty: The SEC has not yet approved any bitcoin ETF applications, citing concerns about market manipulation, fraud, custody, liquidity, and investor protection. While some analysts expect the SEC to approve a bitcoin ETF in 2022, there is no guarantee that it will happen or that it will not impose strict conditions or limitations on the product. Moreover, the SEC could also change its stance or revoke its approval in the future, depending on the regulatory environment and the market conditions.
Competition: Even if a bitcoin ETF is approved in the US, it will not be the first or the only one in the world. Several countries, such as Canada, Brazil, Germany, and Switzerland, have already launched their own bitcoin ETFs, attracting billions of dollars in assets.
A US bitcoin ETF would have to compete with these existing products, as well as with other crypto investment vehicles, such as trusts, funds, futures, and options. Additionally, some investors may prefer to buy bitcoin directly from crypto platforms or wallets, rather than through an intermediary.
Volatility: Bitcoin is known for its high volatility, which means that its price can fluctuate significantly in a short period of time. This could pose a challenge for a bitcoin ETF, as it could create tracking errors, liquidity issues, and arbitrage opportunities.
For example, if the price of bitcoin drops sharply on a crypto exchange, but the price of the bitcoin ETF does not adjust quickly enough on the stock exchange, investors could exploit this discrepancy by selling the ETF and buying bitcoin directly, or vice versa. This could cause the ETF to deviate from its underlying asset and lose value.
Demand: The success of a bitcoin ETF depends largely on the demand from investors. While some investors may see a bitcoin ETF as an attractive way to gain exposure to bitcoin without having to deal with the complexities and risks of owning it directly, others may not be interested or convinced by its benefits.
Moreover, the demand for a bitcoin ETF could also be affected by the sentiment and trends in the crypto market. For instance, if bitcoin enters a bear market or faces regulatory crackdowns or technical issues, investors may lose confidence and interest in the digital asset and its related products.
Bitcoin ETF is not a silver bullet for the crypto industry or for investors. Even if it is approved in the US, it will face many challenges and uncertainties that could limit its success. Therefore, investors should be cautious and well-informed before investing in a bitcoin ETF or any other crypto-related product.