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Could This 1 Thing Propel Bitcoin to $50,000?


After hitting a 2018 low of less than $6,000, leading digital currency bitcoin (BTC-USD) is rebounding. As of 10 a.m. EDT on Monday, July 2, bitcoin is trading for more than $6,600 -- a major reversal.

However, one prominent member of the cryptocurrency industry thinks that this could be just a starting point, and that bitcoin could rally to as much as $50,000 during the second half of 2018. And he believes it might just take one big catalyst to get it there -- bitcoin becoming available to investors in ETF form.

Here's a rundown of why there aren't any bitcoin ETFs yet, why a bitcoin ETF could be such a positive catalyst, and one bitcoin ETF that looks to have a solid chance of SEC approval.

A gold coin with the bitcoin symbol on it sitting in the palm of an extended hand.

Image source: Getty Images.

Today's cryptocurrency prices

Before we dive into the subject of bitcoin ETFs, here's a look at where the leading cryptocurrencies stand today. All of the top five are rebounding significantly.

Cryptocurrency Name (Code)

Price in U.S. Dollars

Day's Change

Bitcoin (BTC)

$6,613.00

3.4%

Ethereum (ETH)

$472.08

3.6%

Ripple (XRP)

$0.48

4.2%

Bitcoin Cash (BCH)

$785.89

6.3%

EOS (EOS)

$8.84

6.7%

Data Source: www.investing.com. Prices and daily changes as of July 1, 2018 at approximately 10:15 a.m. EDT, and prices are rounded to the nearest cent where appropriate.

Bitcoin ETF = $50,000 bitcoin?

In a recent CNBC appearance, Arthur Hayes, CEO and co-founder of the BitMEX cryptocurrency exchange said that bitcoin (BTC-USD) could rise as high as $50,000 by the end of 2018.

As Hayes put it, "We're one positive regulatory decision away, maybe an ETF approved by the SEC, to climbing through $20,000 and even to $50,000 by the end of the year."

Why aren't there any bitcoin ETFs yet?

The short answer is because the SEC hasn't approved any. Several companies have tried to launch them -- from leveraged ETFs to inverse ETFs to just plain-and-simple ETFs that own bitcoins (BTC-USD) and track the digital currency's price. To make a long story short, the agency doesn't feel as if any proposed bitcoin ETFs have met its standards.

Here's why a bitcoin ETF could be a game-changer

There are a few reasons a bitcoin ETF (or several) could be a big deal for the digital currency. Just to name a few:

For starters, many people aren't comfortable with buying bitcoin directly. To be sure, the process of buying bitcoin has become much easier over the past year or so, especially with mainstream financial companies like Square getting into the bitcoin business . However, the reality is that many Americans simply don't understand the technology and have no desire to hold bitcoins in a digital wallet. So, a bitcoin ETF could bring a whole new demographic into the market.

Furthermore, security is a big concern among many would-be investors. There have been several high-profile cryptocurrency hacking incidents, and it's fair to say that the thought of having bitcoin stolen is an obstacle for some people when it comes to holding large sums of the digital currency. A bitcoin ETF would be responsible for the security of the bitcoin it owned, and would be able to employ the most effective techniques to keep it safe.

There certainly are alternatives to owning actual bitcoin, but they really aren't great. Vehicles such as the Bitcoin Investment Trust allow investors to own bitcoin indirectly, but at a huge premium . There are bitcoin futures, but these are relatively short-dated and require a substantial amount of capital.

Finally, a bitcoin ETF would add tremendous legitimacy to bitcoin as an investable asset, especially in the eyes of institutional investors. The main reason behind bitcoin's amazing rally in 2017 was a surge in investor interest, and it's conceivable that a bitcoin ETF hitting the market could create a similar surge in demand.

One proposed bitcoin ETF has a fighting chance of approval

In January, the SEC asked several companies that had proposed bitcoin ETFs to withdraw their applications, due to several concerns, which one newly proposed bitcoin ETF thinks it may have adequately addressed.

Van Eck Associates and cryptocurrency start-up SolidX Partners are teaming up to attempt to bring a bitcoin ETF to market, and filed a request with the SEC in early June. According to the companies, the fund will own bitcoin and will insure said bitcoin against theft or loss in order to protect investors.

And to be clear, this ETF would be squarely aimed at institutional investors, with one share representing 25 bitcoins -- about $165,000 as of this writing. However, if approved, it could help pave the way for other bitcoin and cryptocurrency ETFs aimed toward individual investors and could certainly help drive demand.

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Matthew Frankel owns shares of Square and has no position in any cryptocurrencies mentioned. The Motley Fool owns shares of and recommends Square. The Motley Fool has no position in any cryptocurrencies mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Personal Finance , Stocks
Referenced Symbols: ETH , BCH , EOS


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