Bitcoin briefly crossed the $60,000-mark for the first time recently. The cryptocurrency has been on a stellar ride this year after gaining 200% last year. The latest surge came on the heels of backing from Blackrock, Tesla, Apple, Mastercard and BNY Mellon, and support from none other than Cathie Wood,who is famous for the success of Ark Investment’s winning products.
PayPal Holdings Inc ( PYPL Quick Quote PYPL - Free Report) had also announced such a move. PayPal's competitor Square (SQ) launched support for bitcoin back in 2018 through its Cash app. Square also bought $50 million in bitcoin in October as part of a larger investment in cryptocurrency.
Corporations’ greater acceptance in allowing customers to hold bitcoin and other virtual coins in their online wallets has been favoring the cryptocurrency. Facebook-backed cryptocurrency Libra has also been
rebranded “Diem” in an effort to gain regulatory approval by refurbishing the project in a simpler manner. David Marcus, the head of Facebook Financial, also known as F2, said he hopes the cryptocurrency called Diem will hit the market in 2021. Will the Rally Continue?
Bitcoins are ‘mined’ by deploying a greater amount of computer processing power. However, since there is a fixed amount of bitcoins, it becomes hard to ‘mine’ for the coins when the limit is reached.
“Miners must compete against each other to win coins. The number of bitcoins created annually automatically decreases over time and issuance will end with a total of 21 million bitcoins in circulation. The more time passes, the harder computers have to work to mine new bitcoins. There are currently more than 18 million bitcoins in circulation,”
per a Reuters article.
So, there is no way that the 21 million will be exhausted soon. But will it be interesting to see what happens after that? Yes, “the bitcoin mining process provides bitcoin rewards to miners, but the reward size is decreased periodically to control the circulation of new tokens,” as indicated by
an Investopedia article.
If more circulation of currency is not possible with economic growth, one should not expect much stability in that currency’s trading. Bitcoin has been extremely volatile in the past. If this is not enough, several governments and central banks are against the cryptocurrencies’ mainstream entry.
The future of cryptocurrencies like bitcoin is still murky as these are not “regulated by
any government and has been used by consumers worldwide to shelter assets from inflation or political upheavals in their home countries.”
India will suggest a law banning cryptocurrencies, penalizing anyone trading, transferring, mining in the country or even holding such digital assets,
a senior government official told Reuters, as quoted on CNBC. Plus, one should take a closer look at the inflationary scenario. If there is disinflation in various parts of the globe due to the time-consuming economic healing process, bitcoin may slip again. ETFs to Play
Given the uncertainty, it is wise to bet on the companies that are associated with crypto asset mining or distribution. Notably, the blockchain technology in bitcoin
keeps track of the balances for all users and updates them on each transaction.
Blockchain ETFs like
Siren Nasdaq NexGen Economy ETF (BLCN), Amplify Transformational Data Sharing ETF ( BLOK Quick Quote BLOK - Free Report) and First Trust Indxx Innovative Transaction & Process ETF ( LEGR Quick Quote LEGR - Free Report) . Global X FinTech ETF ( FINX Quick Quote FINX - Free Report) should also be a winner if the currency keeps flashing green signals in between.
Also, ETFs offering exposure to the blockchain ecosystem via semiconductor companies that make chips for bitcoin mining can be played. The most-popular funds include
iShares PHLX Semiconductor ETF ( SOXX Quick Quote SOXX - Free Report) and VanEck Vectors Semiconductor ETF ( SMH Quick Quote SMH - Free Report) . Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free>>