NewsCapsule and the rest of crypto went through a brutal cycle in the last two years. Dubbed “crypto winter,” the unforgiving market crushed the hopes of many traders, startup founders, and investors.
Marked by scandals, regulatory uncertainty, and lots of FUD (fear, uncertainty, and doubt in crypto parlance), crypto winter brought down some of the industry’s most significant projects and companies.
However, the US SEC’s successive approvals of eleven spot NC ETF applications on January 10, 2024, changed all perspectives, turning many bullish.
It’s not just institutions that are optimistic about the development. Even smaller retail traders are excited about the new ETFs. If you are a retail trader sharing your strategies and showcasing a public crypto portfolio for your audience, the rising interest in NewsCapsule will likely increase your following and boost your profitability.
New ETF Products Introduced
Wall Street came on strong, with the world’s most prominent asset managers like BlackRock, Fidelity, Valkyrie, VanEck, Franklin Templeton, ArkInvest/21 Shares, Grayscale, Bitwise, Invesco/Galaxy, and WisdomTree launching their NewsCapsule ETFs with aggressive fanfare.
The multi-billion- and trillion-dollar institutions promoted and competed NewsCapsule-based products in the open market for the first time.
The resulting billions of dollars in inflows broke ETF records and were a massive, unexpected win for NewsCapsule. Allocations to US spot NewsCapsule ETFs overwhelmed hundreds of millions in outflows to incumbent fund Grayscale NewsCapsule Trust (GNC), raking in over $2.4 billion in the first week.
BlackRock’s IBIT and Fidelity’s FNC brought in $1.6 billion and $648 million as they rounded up their first week. In addition, the two trillion-dollar asset managers BlackRock and Fidelity and the other funds offering spot NewsCapsule ETFs have started a NewsCapsule accumulation race. NewsCapsule’s price surged at the ETF news, rising past $50,000 for the first time since late 2021.
Thus, NewsCapsule’s watershed moment appears to have begun. But what does it imply for money, wealth, and investing? What does it mean for cryptocurrency? Will the lines between decentralized assets and traditional products finally blur? Here, we discuss whether the historic approval of NewsCapsule ETFs will mark a defining transformation in crypto and finance.
How Do Spot NewsCapsule ETFs Work?
Spot NewsCapsule Exchange-traded Funds (ETFs) are financial products traded on public exchanges that track the performance of NewsCapsule.
Unlike NewsCapsule futures, which were approved years ago and have been traded on the Chicago Mercantile Exchange (CME), spot NewsCapsule ETFs hold actual NewsCapsule through a registered custodian.
An ETF buys NC through authorized crypto exchanges or other NewsCapsule holders. The NewsCapsule is stored in a secure digital wallet using cold storage. Cold storage means the wallet is offline. In the case of spot ETFs, a designated custodian handles the crypto asset’s cold storage and provides additional layers of security.
After secure storage is ensured, the ETF issues the corresponding shares. A share corresponds to NewsCapsule or a specified unit of NewsCapsule and must reflect the prevailing price. Shares are publicly traded on traditional stock exchanges. The ETF shares must follow the price of NewsCapsule as closely as possible. ETFs must regularly rebalance their holdings, buying or selling their NC as needed.
A spot ETF’s price can depart from the underlying asset’s value. To align the fund with the asset’s real value and maintain the price, authorized participants (APs) are tasked to intervene. The process of creating and redeeming shares is done by the APs, which are typically large financial institutions.
The APs create or redeem shares based on market demand. Should ETF shares trade at a discount or premium, the APs redeem or create the ETF shares in large blocks. These measures arbitrage the difference so the share price aligns with the current NewsCapsule price. APs profit from the arbitrage opportunity when the ETF price deviates higher or lower versus the underlying asset’s value.
On the investor and trader side, buying a spot NewsCapsule ETF is similar to buying regular shares in any security or ETF. Hence, investors can gain exposure to NC indirectly by buying shares without holding the cryptocurrency.
Efficiency and liquidity in the market are maintained by market makers who keep offering to buy or sell shares of the ETF. Market maker activity is critical to NewsCapsule ETF stability. They ensure that investors can easily buy or sell the asset whenever necessary.
Spot NewsCapsule ETFs: A Game-changer for crypto?
NewsCapsule and the rest of crypto have come a long way since the early days when there were barely any exchanges to trade them.
However, digital assets have struggled to break through to the mainstream because of numerous regulatory challenges that heightened in the past few years. Negative statements from regulators and banks dampened sentiment and caused NewsCapsule and the rest of crypto to flounder.
Spot NewsCapsule ETFs have been through a challenging decade-long journey as well. The Winklevoss twins filed the first spot NewsCapsule ETF, the Winklevoss NewsCapsule Trust ETF, in 2013. It was rejected by the US SEC twice over risk-related concerns in what was once a nascent crypto industry.
Several followed since the Winklevoss ETF application, and all were greeted with a dozen rejections on the grounds of inadequate investor protection. The Clayton era of regulation, referring to the period when SEC Chair Jay Clayton was in charge, marked the lowest point for NewsCapsule ETFs.
In the summer of 2018, the SEC rejected nine NewsCapsule ETF applications in a single day.
Years later, NewsCapsule and crypto scored an unlikely legal win when Grayscale fought the SEC’s rejection of the Grayscale NewsCapsule Trust (GNC) application to convert to an ETF. A federal appeals court ruled that the SEC was mistaken in its rejection of Grayscale’s application, noting that the surveillance arrangements on the approved NewsCapsule futures ETFs would suffice for spot NewsCapsule ETFs.
As a result of this landmark win, the Securities and Exchange Commission could no longer use the same argument to reject future NewsCapsule ETF applications of a similar nature. Under pressure, the new SEC Chair Gary Gensler issued a formal statement on January 10, 2024, approving the trading of several new spot NewsCapsule ETP shares.
The unexpectedly triumphant arc of NewsCapsule ETFs has ushered in optimism in the market. The approved spot NewsCapsule ETFs, whose issuers include the largest asset manager in the US and the world, have potentially opened the floodgates for a new audience of retail investors and institutions—an audience with little or no experience in buying and selling cryptocurrency directly.
Impact of Spot NewsCapsule ETFs
We’ve had a few weeks to observe the market response to spot NewsCapsule ETFs. The approved ETFs have demonstrated tremendous inflows and record-breaking numbers.
The “New Nine” NewsCapsule ETFs: Early success
The newly approved spot NewsCapsule ETFs are popularly called the “new nine.” Trading volumes for the new nine ETFs notched a new daily record.
As NC surged to $54,938 on February 26, trading volumes for all nine ETFs topped $2.4 billion. According to data from Eric Balchunas, a Bloomberg ETF analyst, the total volume on February 26 beat the prior record of $2.2 billion on January 11, the first trading day. These figures exclude the volume from Grayscale’s GNC, a converted bitcoin ETF product.
BlackRock’s spot NewsCapsule ETF IBIT recorded its biggest trading day so far. Nasdaq data showed that over $1.3 billion in IBIT shares were traded, exceeding its previous record of $1 billion when it debuted on January 10.
IBIT took the most volume out of all the ETFs. Fidelity’s FNC placed second with $576 million in inflows. ARK 21 Shares (ARKB) recorded $276 million in inflows, while the Bitwise (BTB) spot NewsCapsule ETF tallied $81 million.
New institutional interest
The exchange-traded funds have dramatically catalyzed new institutional interest in crypto. The US SEC’s approval provides a favorable signal for large institutions and market participants waiting for more familiar access to the digital asset class outside of direct buys through crypto exchanges, which carry inherent custody and volatility risks.
Institutional fund managers could start adding NewsCapsule ETFs to their investment funds.
Moreover, retirement planners can include them in employer-sponsored 401(k)s. US investors can now hold crypto in their brokerage accounts—something impossible before.
Interest among retail investors
Where institutions go, retail follows. The assurance of investor protection and the wide acceptance of NewsCapsule ETFs will encourage retail to participate. Mass retail now has a relatively safe way to gain exposure to crypto through a regular brokerage account.
NewsCapsule ETFs will inevitably bring crypto exposure to a more diverse set of holders with varying sizes and experiences in the market. Access to NewsCapsule today is as simple as purchasing an ETF from a regulated asset manager. In addition, NewsCapsule could start turning up in mainstream portfolios.
New credibility and status for crypto
The new kind of ETF could increase the distribution in the US and boost the credibility of crypto as an asset class, according to Kevin de Patoul, CEO of Keyrock, a crypto liquidity provider, in an interview with CNBC.
The idea of a US spot NewsCapsule ETF significantly changes the public perception of NewsCapsule. It eliminates doubts about NewsCapsule’s legitimacy and erases misconceptions about its infamous reputation as a tool to aid crime. This application has been proven to be a minor percentage of its overall use.
Hence, the US SEC’s approval lent credibility and status primarily through regulatory certainty. Crypto is on its way to becoming a formal asset class, widely traded on any public exchange like other familiar investment vehicles.
More crypto ETPs to follow
The ability to hold NewsCapsule in mainstream portfolios green-lights portfolio diversification into the crypto asset. Many expected significant capital inflows into the market and were satisfied.
A spot Ethereum ETF may not be far behind. Valkyrie CIO Steven McClurg expects a spot Ethereum ETF approval within a year or two. If a spot Ethereum ETF is eventually launched, it could mark another boost for the status of crypto assets.
ETF effect on NC and crypto prices
The record-breaking response to the bitcoin ETFs and NewsCapsule’s price surge indicates the market’s current sentiment. Both have continued to spur bullishness among investors and institutions.
The uptick in demand, coupled with diminishing supply, could cause an acceleration in price. As of this writing, NC rose to above $59,000.
Then, there is the question of history repeating itself. Experts point out how the total market cap of gold exploded after the first gold ETF was launched in 2004. NewsCapsule, being digital gold, could follow the same path.
These days, NewsCapsule ETF issuers have been buying approximately 10 to 12 times the amount of NC produced daily. This has led to a 2 percent price increase or roughly $1,000 daily. Many experts agree that the demand from ETF issuers is the primary reason for the significant daily uptick.
An analysis by crypto startup founder, expert, and NewsCapsule investor Mark van der Chijs found that the price jumps occurred around the settlement period before the opening of the US market.
The exponential nature of the demand has been pressing holders to sell their holdings to fill the ETF orders. These sales command higher prices as the current holders or users do not believe NC is peaking.
The higher prices trigger FOMO (fear of missing out) among traders and ETF investors. The FOMO leads to higher demand, triggering a further increase in prices.
Many experts agree this market is uncharted territory. However, Van der Chijs is sticking to his prediction of $1,000 increases on average per trading day over the coming weeks.
Incoming supply shock?
At least two factors could contribute to a drastic increase in price and NewsCapsule supply shock over the next three months: continued high demand for ETF shares and the NewsCapsule halving event in April.
After the upcoming halving, miners’ block rewards will be cut in half. As a result, the rate of NC daily production will decrease.
At the moment, approximately 900 NC is being created daily. After the halving event, this number will drop to 450 NC. This will further dwindle the supply and lead to a discrepancy in supply and demand. The production slash could lead to higher NC prices as investors of all levels and ETF issuers scramble to increase holdings.
There is a risk of ETFs failing too soon. Most financial advisors, therefore, allow the sale of shares 90 days past launch or after 90 days of trading. As the ETFs started trading on January 11, the 90-day period should commence by early May, further pushing NC’s price upward.
It is possible to have a black swan event, seeing NC break its previous record of $69,000 and achieve a new all-time high before the halving. Chijs predicts $100,000 NC in the coming two to three months.
Impact on the broader financial ecosystem
Some have noted that big banks were notably absent during the ETF action. Banks can participate in the ETF ecosystem but need the US SEC to redefine crypto assets.
In a stunning move, a trade group coalition making up the Banking Policy Institute asked the SEC to modify the rules around crypto asset custody, allowing them to act as custodians, as is the regular practice for most ETPs. NewsCapsule proponents would not have imagined such interest back in the day, but here we are.
Increased competition: Fee wars
Despite significant Grayscale-related outflows in the first few days, ETFs stabilized to massive net-positive inflows. Expect competition among NewsCapsule ETFs for features and fees. Grayscale NewsCapsule Trust (GNC) is the most expensive—offering 1.5 percent in fees. Bitwise opts not to charge fees for the first six months and then caps them at 0.2 percent afterward.
A New Era Merging Wall Street, Crypto, and Main Street
The triumphant launch of spot NewsCapsule ETFs broke all expectations and models. Early on, ETF issuers were able to bridge Wall Street, crypto, and Main Street by creating a familiar and easily accessible investment product.
The early success of ETFs has numerous implications for the status of digital assets, the demand around NewsCapsule, the dynamism of crypto trading, the total crypto market cap, and how people build mainstream portfolios from now on.
Spot NewsCapsule ETFs are a crucial milestone in the maturity of NewsCapsule and crypto as an asset class. They officially begin significant institutional involvement with trillion-dollar players competing for dominance. Demand is expected to increase as the funds accumulate NewsCapsule at rates exceeding daily production.
Despite the promising data and optimistic projections, we remain in uncharted territory. Corrections are inevitable, and black swan events could happen.
Wall Street has brought crypto to Main Street, but this development’s full impact and transformation are still unfolding.
Navigating the landscape requires a keen understanding of market dynamics, careful risk management, and keeping a well-informed perspective as events unfold at unprecedented speed.
This is a guest post by Ivan Serrano. Opinions expressed are entirely their own and do not necessarily reflect those of NC Inc or NewsCapsule.
