Here’s a Useful Fund For Investing In Blockchain Without Buying Bitcoin

“Buy the rumour, sell the news” is an old market saying – and we got a classic of the genre yesterday.

It was a huge day in the evolution of bitcoin. From its origins on obscure chat boards, the open-source experiment of a few renegade computer programmers, to mainstream investment vehicle.

And then yesterday, for the first time, a nation – El Salvador – made bitcoin legal tender. The bitcoin price was steadily running up on the story – from $30,000 to $53,000. Then “Bitcoin Day” arrived and wallop: it sells off $7,000 to $46,000. The bitcoin price “should” have risen. It didn’t; it rose on the rumour and sold on the news.

How many times? It’s happened before and it will happen again.

How to bet on cryptocurrencies without having to own cryptocurrencies

Traditional investors have long been searching for a vehicle by which they can own bitcoin through their Sipp or Isa, via a regular broker account. The older generation in particular don’t want to get involved with wallets and keys and storing coins on hard drives in safes and all the rest of it. They just want to be able to buy and sell bitcoin through their regular broker, with which they are familiar.

In response to this demand there have been numerous attempts to establish bitcoin ETFs, but every attempt has run into some sort of regulatory issue. The most successful were probably the Greyscale Bitcoin Trust, listed in the US, or Coinshares Swedish listed XBT Bitcoin Tracker One. Neither is quite the same as owning bitcoin, but they do track the price.

But another vehicle has come to my attention and I thought I’d flag it up for you today, as I think it might be quite useful. That is the VanEck Vectors Digital Assets Equity UCITS ETF (LSE: DAGB).

It invests in companies that, to use its own lingo, “are driving the blockchain revolution”. That is to say in miners, exchanges, payment providers, service providers and companies that hold and trade crypto and crypto patents.

If I were to draw a parallel, I’d say that, rather than buying gold, it’s like holding a basket of gold mining companies or a gold mining ETF.

The ETF is listed in London, and it’s been going since the beginning of May. There’s a dollar denominated version whose ticker is DAPP – and a sterling version, which is probably most useful to us, with the ticker DAGB (there are also euro-denominated versions listed in Germany (DAVV) and Italy (DAPP), and a Swiss franc denominated version listed in Switzerland (also DAPP)).

It’s still small – very small – but as awareness grows it has the potential to grow too. It holds 25 companies in total, with 75%-plus weighting to the US and Canada and 12% to China, and it rebalances on a quarterly basis. I’ll post the holdings below, but in case you’re not familiar with them, I’ll outline what the major ones do. 

It’s biggest holding is Marathon Digital Holdings (Nasdaq: MARA) a Nasdaq-listed bitcoin miner. Then there’s Jack Dorsey of Twitter fame’s payment company Square (NYSE: SQ) and Coinbase (Nasdaq:COIN), the recently-listed wallet-provider and exchange

Other miners it owns include Riot (Nasdaq: RIOT), Hive (Vancouver: HIVE) and Argo (LSE: ARB), while other notable holdings include Silvergate (NYSE: SI), the bank for fintech and cryptocurrency businesses, and Michael Saylor’s Microstrategy (Nasdaq: MSTR). 

Saylor has in the past year totally got the bitcoin bug and become one of the most vocal and articulate cheerleaders for the space. His company, Microstrategy, has gone from being a software company to a bitcoin holding vehicle, owning more than $5bn in bitcoin. He’s raised debt to do it so it is a highly leveraged bitcoin play.

Anyway, here are the main holdings:

HoldingTickerSharesMarket value
(US$)
% of net
assets
Marathon Digital Holdings IncNasdaq: MARA37,8581,491,2279.15
Square IncNYSE: SQ5,3801,430,1658.77
Coinbase Global IncNasdaq: COIN5,0421,345,2568.25
Hut 8 Mining CorpToronto: HUT125,4231,261,6757.74
Silvergate Capital CorpNYSE: SI7,986947,2995.81
Microstrategy IncNasdaq: MSTR1,378892,9585.48
Hive Blockchain Technologies LtdVancouver: HIVE257,250857,1615.26
Voyager Digital LtdToronto: VOYG53,621799,9654.91
Riot Blockchain IncNasdaq: RIOT24,755794,8834.88
Bitfarms Ltd/CanadaVancouver: BITF128,704763,9734.69
Galaxy Digital Holdings LtdToronto: GLXY34,963732,1894.49
Taiwan Semiconductor ManufacturingNasdaq: TSM5,431677,2464.15
Canaan IncNasdaq: CAN64,785620,6403.81
Northern Data AgFrankfurt: NB26,290568,4983.49
Argo Blockchain PlcLSE: ARB288,705533,3123.27
Bit Digital IncNasdaq: BTBT45,480533,0263.27
Ebang International Holdings IncNasdaq: EBON157,795397,6432.44
BC Technology Group LtdHong Kong: 863179,501372,2122.28
Coinshares International LtdStockholm COIN26,030257,8651.58
Diginex LtdNasdaq: EQOS40,141222,3811.36
DMG Blockchain Solutions IncVancouver: DMGI201,595205,8231.26
Huobi Technology Holdings LtdHong Kong: 1611113,001204,9561.26
Bigg Digital Assets IncToronto BIGG183,875180,4551.11
Future Fintech Group IncNasdaq: FTFT58,088156,8380.96
Bitcoin Group SeFrankfurt: ADE1,22261,2300.38
Other/Cash-4,083-0.03

Bitcoin is supposed to be outside of the traditional financial system so it sounds funny saying that I own DAGB in my Sipp, but I do. I’m not, however, recommending that you go out and buy it straight away. I see it more as a useful vehicle to be aware of.

My overriding theory that we are in a period of “frustrating consolidation” for bitcoin remains in play, so I would try to wait for the sell off to get really harsh before you buy: buy the dips, as they say. But this should be a good vehicle to play the bitcoin game, should you see fit.

Regulating the unregulatable

In other news, I see that a bit of a crypto storm is now brewing in Brussels, where the European Parliament is about to try and regulate cryptocurrencies. Good luck with that! What could possibly go wrong when regulators are trying to regulate something they don’t understand, one of the purposes of which is to obviate bureaucracy?

The polling company Redfield and Wilton has run a poll and found that the overwhelming majority of Europeans want cryptocurrencies regulated by their own countries and not at the EU level, with many seeing EU regulation as a power grab. Greece, The Netherlands and Latvia are the most anti-EU regulation, while Spain and Portugal are the most pro. Make of that what you will.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Dominic Frisby author headshot

By: Dominic Frisby

Source: https://moneyweek.com/

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Crypto Price Mayhem: Data Reveals Bitcoin Is Braced For A ‘Short Squeeze’

bitcoin, bitcoin price, crypto, image

Bitcoin traders and investors are still reeling from a steep sell-off that’s wiped around $1 trillion from the combined cryptocurrency market.

The bitcoin price has crashed from almost $65,000 per bitcoin to under $40,000 despite a flood of positive bitcoin news in recent weeks—including Twitter TWTR +0.2% chief executive Jack Dorsey teasing a bitcoin payments plan.

Now, analysis of bitcoin trading data has suggested the bitcoin price could be hit by a so-called “short squeeze”—when the price of an asset increases rapidly due to an excess of bets against it.

“Given bitcoin’s past market performance, when traders use excessive leverage to short the market during a horizontal price adjustment, there will often be a short squeeze phenomenon,” Flex Yang, the chief executive of Hong Kong-based crypto lender and asset manager Babel Finance, wrote in analysis seen by this reporter and pointing to market data that shows recent capital inflows are “from short-sellers and that leverage has greatly increased.”

Since the bitcoin and crypto market crashed in mid-April, the volume of bitcoin perpetual holdings on the crypto exchange Binance have increased by 110%, with the ratio of long to short traders reaching a new low of 0.89—pushing funding rates into the negative.

According to Yang, the reasons behind such excessive shorts include “many people are anticipating a bear market; bitcoin “holders are building hedges,” or “those who bought at high prices are locked in.”

Historical bitcoin price data between February and April 2018 and then again from June to late July 2020, suggests an increase in short-selling is often followed by a bitcoin price surge.

“In November 2020, there was a temporary sharp increase in the number of short-selling positions at a high price,” wrote Yang. “Afterwards, the price of bitcoin continued to rise, continuing its bull market position. No matter if the market outlook is trending downwards after rebounding or if bitcoin maintains its bull market status, short traders have always suffered the consequence of being squeezed out and liquidated.”

The early 2021 bitcoin price bull run was brought to a sharp halt in April when fears over a crypto crackdown in China and mounting concerns over bitcoin’s soaring energy demands sparked panic among investors.

Tesla TSLA +1.1% billionaire Elon Musk sent shockwaves through the bitcoin market when he announced Tesla would suspend its use of bitcoin for payments until the bitcoin network increased its use of renewable energy.

The bitcoin price has failed to recover its lost ground despite continued reports that Wall Street banking giants are increasingly offering bitcoin investment and trading services and the Central America country El Salvador revealed plans to adopt bitcoin as legal tender alongside the U.S. dollar.

Follow me on Twitter.

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk I reported on how technology is changing business, political trends, and the latest culture and lifestyle. I have covered the rise of bitcoin and cryptocurrency since 2012 and have charted its emergence as a niche technology into the greatest threat to the established financial system the world has ever seen and the most important new technology since the internet itself. I have worked and written for CityAM, the Financial Times, and the New Statesman, amongst others. Follow me on Twitter @billybambrough or email me on billyATbillybambrough.com. Disclosure: I occasionally hold some small amount of bitcoin and other cryptocurrencies.

Source: Crypto Price Mayhem: Data Reveals Bitcoin Is Braced For A ‘Short Squeeze’

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Critics:

Predictions of a collapse of a speculative bubble in cryptocurrencies have been made by numerous experts in economics and financial markets. Bitcoin and other cryptocurrencies have been identified as speculative bubbles by several laureates of the Nobel Memorial Prize in Economic Sciences, central bankers, and investors.

From January to February 2018, the price of Bitcoin fell 65 percent. By September 2018, the MVIS CryptoCompare Digital Assets 10 Index had lost 80 percent of its value, making the decline of the cryptocurrency market, in percentage terms, greater than the bursting of the Dot-com bubble in 2002.

In November 2018, the total market capitalization for Bitcoin fell below $100 billion for the first time since October 2017, and the price of Bitcoin fell below $4,000, representing an 80 percent decline from its peak the previous January. Bitcoin reached a low of around $3,100 in December 2018.From 8 March to 12 March 2020, the price of Bitcoin fell by 30 percent from $8,901 to $6,206.By October 2020, Bitcoin was worth approximately $13,200.

Bitcoin has been characterized as a speculative bubble by eight winners of the Nobel Memorial Prize in Economic Sciences: Paul Krugman, Robert J. Shiller, Joseph Stiglitz, Richard Thaler, James Heckman, Thomas Sargent, Angus Deaton, and Oliver Hart; and by central bank officials including Alan Greenspan, Agustín Carstens, Vítor Constâncio, and Nout Wellink.

The investors Warren Buffett and George Soros have respectively characterized it as a “mirage”and a “bubble”; while the business executives Jack Ma and Jamie Dimon have called it a “bubble” and a “fraud”, respectively. J.P. Morgan Chase CEO Jamie Dimon said later he regrets calling Bitcoin a fraud.

Tanzania Considers Crypto and Boosts Bitcoin as Nations Line Up Behind El Salvador To Embrace Decentralized Finance

Bitcoin

Tanzania became the latest country to signal its support for digital assets this weekend as its president instructed financial authorities to prepare for widespread use of cryptocurrencies, elevating bitcoin prices further after El Salvador became the first country to make bitcoin legal tender last week and Elon Musk outlined plans for Tesla to resume accepting bitcoin as a form of payment.

Key Facts

President Samia Suluhu Hassan called on the Tanzanian Central Bank Sunday to begin “working on” facilitating widespread use of cryptocurrencies in the East African nation.  While many in Tanzania have not yet embraced decentralized finance, Hassan said the Central Bank should “be ready for the changes and not be caught unprepared.

”Hassan is one of the most senior politicians to signal support for digital assets since El Salvador voted to adopt bitcoin as legal tender last week and helped give the flagging market a boost. The announcement helped bitcoin gain nearly 10% in 24 hours, nearly reaching $40,000 a token Monday morning.

The token was also buoyed on by news that Tesla would resume its use of bitcoin when there is proof the asset is obtained using around 50% clean energy.

What To Watch For

There is growing popular support for bitcoin adoption in Nigeria that also gained momentum over the weekend. Russell Okung, an NFL player of Nigerian descent, penned an open letter to the Nigerian president imploring the country to adopt a Bitcoin standard so as to avoid “falling behind.” Twitter and Square CEO Jack Dorsey, one of the most high profile crypto enthusiasts, tweeted his support of the idea a number of times over the weekend.

Key Background

While reaching its highest point in several weeks, bitcoin, along with the wider crypto market, is still recovering from a tailspin that rapidly wiped over $700 billion from the market’s value. This slump was primarily induced by Tesla announcing it would no longer accept bitcoin due to environmental concerns and China cracking down on the assets.

Support from the likes of El Salvador, alongside other countries and banks that may begin to adopt bitcoin, or other cryptocurrency tokens, the market has slowly started to recover, though remains volatile. Beyond Tanzania, lawmakers in a number of Latin American countries have expressed at least a casual interest in following El Salvador’s footsteps, including Brazil and Panama.

Further Reading

El Salvador Makes History As World’s First Country To Make Bitcoin Legal Tender (Forbes)

Tanzanian president urges central bank to prepare for crypto (Coin Telegraph)

I am a London-based reporter for Forbes covering breaking news. Previously, I have worked as a reporter for a specialist legal publication covering big data and as a freelance journalist and policy analyst covering science, tech and health. I have a master’s degree in Biological Natural Sciences and a master’s degree in the History and Philosophy of Science from the University of Cambridge. Follow me on Twitter @theroberthart or email me at rhart@forbes.com

Source: Tanzania Considers Crypto—And Boosts Bitcoin—As Nations Line Up Behind El Salvador To Embrace Decentralized Finance

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Critics:

The European Union has passed no specific legislation relative to the status of bitcoin as a currency, but has stated that VAT/GST is not applicable to the conversion between traditional (fiat) currency and bitcoin. VAT/GST and other taxes (such as income tax) still apply to transactions made using bitcoins for goods and services. 

In October 2015, the Court of Justice of the European Union ruled that “The exchange of traditional currencies for units of the ‘bitcoin’ virtual currency is exempt from VAT” and that “Member States must exempt, inter alia, transactions relating to ‘currency, bank notes and coins used as legal tender‘”, making bitcoin a currency as opposed to being a commodity. According to judges, the tax should not be charged because bitcoins should be treated as a means of payment.

According to the European Central Bank, traditional financial sector regulation is not applicable to bitcoin because it does not involve traditional financial actors. Others in the EU have stated, however, that existing rules can be extended to include bitcoin and bitcoin companies.

The European Central Bank classifies bitcoin as a convertible decentralized virtual currency. In July 2014 the European Banking Authority advised European banks not to deal in virtual currencies such as bitcoin until a regulatory regime was in place.

In 2016 the European Parliament’s proposal to set up a task force to monitor virtual currencies to combat money laundering and terrorism, passed by 542 votes to 51, with 11 abstentions, has been sent to the European Commission for consideration.

See also

References

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