New ETF driving bitcoin price to record highs above $65K
(Kitco News) - Bitcoin prices have pushed to new all-time highs trading well above $65,000 an ounce. According to some analysts, the rally in the digital currency was spurred by the launch of the first Bitcoin ETF in the U.S.
According to Tuesday's trade data, during its inaugural trading session, the ProShares Bitcoin Strategy ETF (NYSEArca: BITO), which tracks CME bitcoin futures, trading 24 million shares. It was the second-biggest ETF debut on record.
With Bitcoin hitting a new all-time high, BITO is currently up nearly 8% during its second day of trading, last trading at $43.17 per share.
With the crypto market enjoying new momentum and new mainstream attention, some investors are wondering what impact this could have on the precious metals market. Many analysts have noted that the strong rally in digital currencies this year has been a significant factor for gold's lackluster performance.
Currently, gold prices are struggling to push back above $1,800 an ounce. Although bitcoin has drained some momentum away from the precious metals sector, some analysts don't see the new ETF as a game-changer for gold.
Phillip Streible, chief market strategist at Blue Line Futures, explained that owning the bitcoin ETF is not the same as owning the digital currency itself.
The new ETF tracks the CME's Bitcoin futures contract, which is settled in cash. According to some analysts, BITO is a trade on the price of bitcoin rather than the market.
"The ETF is a proxy of a proxy and that can create a whole lot of challenges for traders," said Streible. "I think you will see a couple of days of hype and then the momentum will shift."
Mike McGlone, senior commodity strategist at Bloomberg Intelligence, also noted some issues with the ETF, describing it as a tool for traders.
"The fund's ability to track spot prices will break down over the long term due to the costs of keeping front-month exposure -- likely 10-20 percentage points a year," he said in a report Tuesday.
David Madden, market analyst at Equiti Capital, said that the new Bitcoin ETF gives the crypto market another level of legitimacy that will continue to attract more mainstream hedge funds.
However, he added that he doesn't expect it will be a game-changer for the gold market.
"The rally in bitcoin and the new ETF is not doing gold any favors right now. But the main challenge for gold right now remains the strong U.S. dollar and rising bond yields," he said.
Colin Cieszynski, Chief Market Strategist at SIA Wealth Management, said that he also doesn't see the new Bitcoin ETF distracting and attracting investors away from gold. He added that the two alternative assets will find an equilibrium at some point and eventually co-exist in the marketplace.
"There is no doubt that Bitcoin has siphoned some momentum away from gold, but I wonder how long this will last. There is a core market for gold that will never go over to bitcoin,' he said. "But it is too early to say what impact this new ETF will have on markets."