2021-10-16 15:39 |
Of late Bitcoin’s price has been on an ignited bull run, with the asset recouping $60,000 for the first time in over 160 days as expectations of a Bitcoin futures ETF approval flare-up.
Futures ETF prone to manipulationHowever, Mexican billionaire Ricardo Salinas is not buying into the hype and warns of negative effects on the asset’s price going into the future once the SEC approves a Bitcoin Futures ETF.
According to him, a Bitcoin Futures ETF could prove fatal to the asset’s price as it gives big institutional investors the power to use “excess leverage” buying and then dumping the asset thus suppressing price.
“So I’ve been trading futures for over 40 years…. It’s all paper-based. Any big bank can post enormous trades based on margin, without ever taking delivery. That happens in the gold market today. Futures become disconnected from cash.” he added.
The business magnate who has been an ardent follower of Bitcoin even announcing last month his Electra store Network would soon be integrating the Bitcoin Lightning network is one of the few Bitcoin disciples who feel that a direct Bitcoin ETF would be better.
A futures ETF faced with the ‘Contango Bleed risk‘According to Alex Kruger, in the long run, a BTC futures ETF could fail to match Bitcoin’s price suffering a “Contango Bleed”, a dreaded market dynamic that is synonymous with futures traded ETFs where a fund underperforms contrary to the underlying asset’s price.
According to the market pundit, “Futures are usually in strong contango effect, so at rollover, the ETF would sell low to buy high and suffer Contango Bleed. Assets with strong contango bleed trend lower”.
He further posits that owing to contango bleed, he expects the annualized roll yield on a Bitcoin futures ETF to drop to 5%-10% range most of the time as a result of “tradefi” money(institutional money) pouring in thus compressing yields.
Expect a list of Bitcoin Futures ETFs to be approved in Q4SEC’s chair Gary Gensler has on previous occasions suggested that the regulator would be more inclined to approve a futures ETF as opposed to a direct Bitcoin ETF which he has argued is too risky for not being rooted in regulatory commodity markets.
On Thursday, the regulator further reiterated its preference for a futures ETF by posting a Bitcoin Futures investing guide on its website, which further points at an imminent approval. Several futures ETFs are expected to be approved starting Monday next week in what many believe will be a watershed moment for the crypto industry.
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