A Cool Take on the Hot ETF Drama

Cryptocurrency has an attitude of passion, global economic mission, greed—and perhaps a promising start for the future of finance.

When it comes to cryptocurrency and the highly anticipated launch of several spot bitcoin ETFs, I’ll readily admit I’m no expert on the mechanics. Fortunately, etf.com’s stellar journalists are all over this story and have been for a long time. 

I am, however, old enough to remember living through every market event as an industry professional since I walked into the beloved World Trade Center in NYC in 1986 to start my first job out of college. Since that time, bulls, bears and pigs have done what they always do: be themselves. 

So I’ll admit to feeling a bit left out of the barrage of bitcoin ETF missives, along with the surrounding drama and anticipation. Some see this as the most impactful exchange-traded fund launch moment ever; I can’t comment on the validity of that. I hardly qualify as a crypto enthusiast or deep diver.

That said, we learn after decades that you don’t miss an opportunity to make money in the markets, especially when you can judge potential reward to surpass potential loss.

That brings me to the subject on so many minds: spot bitcoin ETFs. 

Bitcoin and the Appeal of Big Returns 

“Number go up,” right? That’s the title of a recent book by Zeke Faux of Bloomberg, who has quite the Dickensian surname. It’s based on the adventures he describes as he witnesses the “frenzy” around crypto and bitcoin. Call it a Super Bowl moment with the launch of close to a dozen ETFs once the SEC decides to finally approve them – as many expect will happen any day now.

Bitcoin sat around $46,600 as of the afternoon of Jan. 9 – down from the all-time high of $67,566 in November 2021. But crypto watchers on both sides of the “coin” (pun intended) can quickly site huge up or down moves over the past several years. That noted, this recent “number go up” period was likely tied to the anticipated launch of spot bitcoin ETFs. Today’s price sits about where it did 35 months ago, in February 2021.

T-bills and the people who love them must be jealous of that. After all, they have outperformed bitcoin since that time, but don’t have a generation of investors and ETF industry participants raving about them like a rock band at its private-jet peak. 

SBF, CZ and Other Letters 

Sam Bankman-Fried, Changpeng Zhao and others have gone from crypto heroes to convicted criminals, and the gap between the peak and the pit closed quite fast. Those two men hail from opposite parts of the world, so we could say that crypto fraud is truly a global industry.

Yet enthusiasm for a currency backed by no central government, and whose founder remains unknown, continues unabated. Witness the alleged industrial demand for bitcoin ETFs as you read this.

Some think that these pending bitcoin ETF launches will lift the price much higher. Yet I see potential technical evidence that charting bitcoin differs from equities or ETFs. The price moves are so volatile you must compress your time frames – which forces you to think (and act) more like a trader.

Or maybe a third shoe will drop to follow SBF and CZ to the cellar and yield another set of toxic initials. Could Bitcoin’s price spell XVI – $16,000 in Roman numerals? Don’t laugh it off, let alone rule it out. Bitcoin rallied to $47,000 from just above that price starting in November 2022.

Bitcoin ETFs: Long live the King? 

All this noted, I see what many others do in the mission of cryptocurrency and particularly the benefits of blockchain to humanity. Since bitcoin ranks as one of many digital currencies, perhaps this signals the start of something special – and not a top in risk assets, dot-com-bubble style.

The companies held in ETFs like the $1 billion Amplify Transformational Data Sharing ETF (BLOK) are not only real and listed on the stock exchanges, but also in the case of that portfolio trade at about 22x trailing earnings: way better than some fledgling industries.

On a recent episode of the Julia La Roche show podcast, noted market analyst Jim Bianco emphasized that 80% of the developing word uses mobile phones but lack stable local-currency monetary systems. He argues (and I agree) that this represents a primary advantage of bringing coins, and especially the technology that makes them possible, to that part of the world. 

Regardless, bitcoin ETF investors should heed this note of caution. Truly committed “buy-and-“HOLDers” of bitcoin likely care little about charts or much else beyond their own investment cases. Understood. But should you fall into that camp, think hard about exactly why you feel that way and position yourself that way.

Make sure it’s based on investment research – not speculation, excitement and a sense of status. The bridge between bold enthusiasm and investment acumen need not be impossible to cross, whether by crypto or any other means.