Investing is a curious game. You need to keep asking the right questions and finding answers. The financial markets are so large and full of opportunities, but you can’t be everywhere. Each asset class comes with its unique baggage. Consequently, investors have to keep a balance while hunting for opportunities. But when two of the hottest areas of the investment world meet, everyone pays attention.
Last Tuesday, October 19, 2021, a highly-anticipated bitcoin exchange-traded fund (ETF) started trading. What this means is the most widely traded cryptocurrency is available to most investors with a brokerage account. For cryptocurrency enthusiasts and investors looking to capitalize on the growing popularity of exchange-traded funds (ETFs), the possibility of an ETF that tracks bitcoin is the best opportunity for this type of connection.
For context, an ETF is an investment vehicle that tracks the performance of a particular asset or group of assets. ETFs allow investors to diversify their investments without actually owning the assets themselves. ETFs are a simpler alternative to buying and selling individual assets for people who want to focus solely on gains and losses. Because many traditional ETFs target larger baskets of names with something in common—a focus on sustainability, for instance, or stocks representing the video game industry and related businesses—they allow investors to easily diversify their holdings.
“2021 will be remembered for this milestone,” said Michael Sapir, the C.E.O. of ProShares. Investors who are curious about crypto but hesitant to engage with unregulated crypto exchanges want “convenient access to Bitcoin in a wrapper that has market integrity,” he said. The ProShares Bitcoin Strategy ETF, with the ticker “BITO,” jumped 4.8 per cent on its debut to close at $41.94. According to TradingView data, 24.313 million shares changed hands in BITO’s first day, translating into a volume of just over $1 billion.
Is this the top?
If recent history is any guide, this could mark a peak for digital assets. Two other “milestone” moments for digital assets were followed by losses. When crypto exchange Coinbase went public in April, that word got tossed around a lot. The same happened in December 2017: bitcoin futures debuted on trading exchange Cboe Global Markets (and on CME Group, the world’s largest financial derivatives exchange, slightly thereafter). Those events were seen as potent enough to legitimize crypto among regular people and institutional investors, but both turned out to be high-water marks for bitcoin. However, there are no certainties in the short term. Markets have also rallied amid uncertainties this year.
What does it mean for the Nigerian market?
The Nigerian Exchange (formerly Nigerian Stock Exchange) has only 12 ETF securities listed. Recently, the NGX admitted that Nigeria’s young population is not quite interested in its offerings. It also said it intends to use technology as bait to get youth participation.
However, the youths seem to have selected their preferences. Despite regulatory restrictions, Nigeria is the world’s top user of cryptocurrencies. Poverty and the gap in financial inclusion have fueled interest in these digital assets. As a result, investment platforms such as Trove have added cryptos to their offerings.
The outrage caused by CBN’s freezing of accounts owned by investment platforms proved young Nigerians prefer foreign assets. “How to earn in dollars in Nigeria” reached an all-time high in Google searches this year, showing that Nigerians have a growing appetite for a stronger currency.
BITO is not the first of its kind. Earlier this year, three bitcoin ETFs were approved in North America. A bitcoin ETF in Nigeria might be the tipping point for the Nigerian Exchange. However, it does not seem within sight. Cryptocurrencies are not yet welcome among Nigeria’s regulatory agencies.
Written by Oluwatosin Ogunjuyigbe
