Crypto investment accessibility set to grow ahead of expected inflation rate hikes
CryptoCompare data shows the price of Bitcoin (BTC) started the week close to the $40,000 but failed to breach that mark and keep moving upwards. Instead, the flagship cryptocurrency’s price dropped to a $33,000 low at press time.
Ethereum’s Ether, the second-largest cryptocurrency by market capitalisation, moved from around $2,600 at the beginning of the week to a $2,000 low at press time as the entire crypto market moves downward.
This week saw the availability of cryptocurrency investment products grow as early in the week Goldman Sachs revealed it was planning to offer ether options and futures contracts in the coming months.
The Wall Street giant restarted a trading desk to help clients trade bitcoin futures earlier this year, and is now also planning on helping them trade contracts tied to the second-largest cryptocurrency by market capitalisation. Mathew McDermott, Goldman’s head of digital assets, said the bank is also looking to facilitate trades via exchange-traded notes tracking bitcoin.
Similarly, Morgan Stanley’s wealth management clients may soon have one more option to gain exposure to Bitcoin. NYDIG and FS Investments have filed with the U.S. Securities and Exchange Commission (SEC) for a pooled investment fund aimed at the bank’s clients.
In March, Morgan Stanley became the first big American bank to offer its clients exposure to the cryptocurrency space through a trio of funds. These funds allow investors to gain exposure to bitcoin without buying it directly or managing a wallet’s keys.
Moreover Spain’s second-largest bank Banco Bilbao Vizcaya Argentaria (BBVA) has opened a bitcoin trading service to all its private banking clients in Switzerland. The service will be available as of June 2021 and will include both trading and custody services. BBVA is planning to expand the service to other cryptocurrencies in the future.
These new cryptocurrency investment products are being launched at a time in which the U.S. Federal Reserve has signalled it expects to raise interest rates sooner than they had previous forecast and that they are looking to stake small steps toward reducing their bond purchases.
Federal Reserve policymakers have revealed they expect to make two interest rate increases by the end of 2023, dropping their previous forecast that aimed to keep rates near zero until at least 2024. Officials see interest rates rise to 0.6 per cent by 2023.
While traditional financial institutions are making it easier for investors to gain exposure to cryptoassets through new offering, the U.S. Securities and Exchange Commission (SEC) has once again delayed passing judgement on a bitcoin exchange-traded fund (ETF), extending its review period on the VanEck Bitcoin Trust.
Bitcoin exchange-traded funds are already available in Canada, but one is yet to launch in the United States. Notably, data this week suggests the Purpose Bitcoin exchange-traded fund (ETF), which launched back in February, has now accumulated 19,692.149 BTC. It added 284.51 BTC over the past seven days and nearly 2,000 BTC since the cryptocurrency’s May 15 crash.
Betting on Bitcoin
Some notable investors have already signale they are eyeing BTC as an inflation hedge. Billionaire hedge fund manager Paul Tudor Jones revealed in an interview he will “go all in on the inflation trades” if the U.S. Federal Reserves fails to act.
The National Republican Congressional Committee (NRCC), a lobbyist organisation aimed at supporting the election of Republicans to the U.S. Congress, is set to start accepting cryptocurrency donations in the near future as well, even though it will convert all funds receive to US dollars.
Nasdaq-listed business intelligence firm MicroStrategy is also betting big on bitcoin as it plans to sell up to $1 billion in stock to buy more bitcoin, shortly after it announced it complete the sale of $500 million in bonds to increase its 92,079 BTC stash.
Notably, Tesla CEO Elon Musk revealed this week the electric car maker will resume accepting bitcoin payments once around 50% of the cryptocurrency’s mining is done using renewable energy.
Bitcoin’s taproot upgrade gets support to lock in activation
Taproot is Bitcoin’s most anticipated upgrade since Segregated Witness (SegWit) in 2017. While SegWit focused on scaling the Bitcoin protocol, Taproot focuses on giving Bitcoin a new signature scheme known as Schnorr signatures. At least 90% of the mined blocks on the Bitcoin blockchain signalled support for the upgrade.
The new signature scheme opens up possibilities that include improving privacy, security, scaling, and multisignature wallets. Now that the soft fork upgrade has been “locked in”, there’s a 5-month waiting period during which miners and nodes have time to upgrade their software to the latest version of Bitcoin Core, which contains activation logic for the Taproot soft fork.
Taproot is now set to activate automatically when the Bitcoin network reaches block 709,632.
Francisco Memoria is a content creator at CryptoCompare who’s in love with technology and focuses on helping people see the value digital currencies have. His work has been published in numerous reputable industry publications. Francisco holds various cryptocurrencies but has no bias in his writing.