We can’t ignore the elephant in the room – Bitcoin has gained over 150% year-to-date.
This makes it one of the best-performing assets on the market so far this year. We still have a couple more days to close the books here, but don’t expect big changes during the holiday season.
Is this a long-term trend that investors should pursue in 2024? Or is it another short-lived spike?
Let’s dig in…
A High-Risk Speculation
The leading crypto asset has delivered massive gains in recent months. In October alone, Bitcoin surged 27%.
The gain came on the back of an anticipation of the Security Exchange Commission’s (SEC) approval of crypto exchange-traded products, or ETFs.
Today, crypto ETFs track futures contracts but not spot prices.
These are synthetic products that require a lot of work by ETF issuers. After all, they aim to duplicate the performance of the underlying cryptos as closely as possible. Not an easy task.
Getting permission to establish spot-based crypto ETFs will make the lives of the companies running these ETFs much easier.
This will increase the penetration of Bitcoin and other crypto assets into the mainstream.
They would be much easier to deal with than crypto exchanges and wallets.
We covered this potential development in September…
However, the SEC still has no official ruling on that matter. In other words, spot-based ETFs can still be rejected, which could likely wipe out some, if not all, the gains Bitcoin and other cryptos delivered so far this year.
At this point, an SEC-approved crypto ETF is no more than a speculation. Hence, it’s a high-risk bet.
Back in October, the SEC said it was working on as many as ten crypto ETF applications from the largest asset managers, including BlackRock, Bitwise, WisdomTree, Fidelity, and Invesco.
These have trillions of dollars in assets under management and can add significant volumes to the crypto market.
New Rules?
At the same time, the regulator is not keen to let investors dive into the crypto space.
The SEC is implementing a new set of rules that may be a major hurdle for most crypto projects.
There are few details about the actual changes, but the SEC has already boosted its crypto staff headcount by 40%. These employees will closely monitor the space and track any wrongdoings.
It’s not a surprise after what FTX, Voyager, BlockFi, Mining Capital Coin, Kraken Exchange, and others have gone through and what they did to their investors.
The SEC will do everything in its power to protect investors from another crypto crisis. It may even limit mainstream investors’ access to crypto assets in general.
This is still a big risk for crypto assets. Negative news from regulators can drive the value of the crypto market down at a rapid speed. After all, the massive gain in Bitcoin can quickly disappear.
Still Too Risky
At the Financial Star, we prefer more established trends. Those with stable long-term outlooks and less volatility or regulatory risk. Crypto isn’t one of them.
In our opinion, there is just too much risk here. Instead, we would keep watching for the latest developments in the clean energy space, artificial intelligence (AI), critical minerals, and others.
These sectors have better fundamental outlooks and a chance to deliver positive performance results to their early adopters.
Thank you for your loyal readership,
The Financial Star team
