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Will the Bitcoin Bounce Last? ETFs in Focus

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The bitcoin market faced its share of troubles lately, with prices down about 33% in the past year. But the cryptocurrency shot up on Apr 2, marking its biggest one-day rally since April last year. The price broke $5,000 for the first time since mid-November but erased some gains later. The other key cryptocurrencies by market capitalization, Ethereum and Ripples, also saw considerable daily gains.

Oliver von Landsberg, CEO of crypto firm BCB Group, explains the sudden price gain as a result of a major order by an anonymous buyer, which triggered a spell of automated trading. Trace Mayer, a successful investor and early Bitcoin preacher, applies a metric to determine how overbought or sold Bitcoin is. This “Mayer Multiple” has been hinting at a buying opportunity for bitcoin for the last few months, per an article published on newsbtc.com.

Gabor Gurbacs, digital asset strategist at VanEck, sees the price jump as the result of short squeeze. The strategist noted that “CME bitcoin futures expired last Friday. A large chunk of positions was rolled (buying) into the new front month BTC futures contract. Over the weekend, heavy spot bitcoin and over-the-counter buying followed the bitcoin futures contract expiration pushing BTC price up slowly and gradually. As the price moved up in increments, over $500 million shorts have been liquidated on leveraged crypto derivatives trading platforms around the world,” as quoted on barrons.com.

Many market watchers are seeing the price increase as an indication to the end of the current bear market. According to them, sentiments over bitcoin trading have been turning bullish over the last 3-4 weeks. Trading volumes of altcoin futures including Bitcoin Cash and Litecoin have also witnessed an increase in recent weeks. However, others believe the surge is just“another bull-trap-bounce and that lower prices are to be expected.”

No Developments on the SEC Front

On Mar 29, two bitcoin-backed exchange-traded fund proposals were delayed by the Securities and Exchange Commission. On Mar 15, the Cboe Global Markets said it does not plan to offer bitcoin futures contracts any more amid slumping volumes. Currently-listed Cboe XBT futures contracts, which expire in June, are up for trading. Cboe launched the first U.S. bitcoin contracts in December 2017 when the cryptocurrency was hovering around $20,000 (read: Will 2019 See a Bitcoin ETF?). 

In a nutshell, bitcoin rallied at a time when market news went primarily against it. However, a yearlong lull in the asset class may help it attain some reversal this year. This is especially true given that the risk-on sentiments may stay strong thanks to a dovish Fed and ECB, and less trade tensions this year. If economic growth numbers come in at least modest, we can expect 2019 to be decent for risky assets (read: Top ETF Stories of Q1). 

ETF Impact

Though bitcoin ETFs are not available to investors, they have blockchain ETFs at their disposal. Per a source, “the blockchain in Bitcoin literally acts a ledger; it keeps track of the balances for all users and updates them as money changes hands.”

So, if investors cannot lay their hands on a bitcoin ETF now, they can definitely familiarize themselves with the concept through blockchain ETFs like Reality Shares Nasdaq NexGen Economy ETF (BLCN - Free Report) , Amplify Transformational Data Sharing ETF (BLOK - Free Report) and First Trust Indxx Innovative Transaction & Process ETF (LEGR - Free Report) . 

Investors should note that mining of cryptocurrencies needs the usage of semiconductors. So, if there is a future rally, investors may tap the opportunity with semiconductor ETFs likeSemiconductor Vaneck Vectors ETF (SMH - Free Report) , Invesco Dynamic Semiconductors Portfolio (PSI - Free Report) andSPDR S&P Semiconductor (XSD - Free Report) .

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