Bitcoin prices have been trading at a very tight range for the past month but recent commentary from
the International Monetary Fund has created additional dark clouds. The IMF warned that the increase
in growth of bitcoin and other cryptocurrencies could generate additional issues in the international
The IMF is in the process of evaluating how the cryptocurrency market could affect traditional monetary
policy systems and how they could be integrated as investment tools as well as payment mechanisms.
They are also trying to determine how the volatility associated with these markets can alter the
stabilization of current financial markets. The rapid increase in the value of Bitcoin during December of
2017 which was followed by a crash to the 6K level is a scary prospect for those who are looking for
On Tuesday October 9, the IMF released its World Economic Outlook. In addition to altering their
growth prospects, the IMF showed concern for cyber-attacks related to financial infrastructure. The
addition of Bitcoin to the investment landscape could undermine cross border payments and alter the
flow of goods and services across borders. While there are some like the IMF chief that believe that a
world with cryptocurrencies are inevitable, there are many who believe that bitcoin trading represents
the wild west.
Cyber Attacks Are Rising
While the bitcoin market is supposed to be transparent – providing investors with the safety that their
digital coins were tracked since inception, cyber criminals are ratcheting up attacks. A report released in
September by McAfee, a digital security firm, revealed that cybercriminals were increasing their efforts
to generate devices with bitcoin malware. McAfee reports that more than 1.5 billion worth of
cryptocurrency has been hijacked during the past 2-years.
The SEC is Taking Its Time with a Bitcoin ETF
The US Securities and Exchange Commission continues to request additional comments before it
determines whether a Bitcoin ETF is appropriate for retail investors. Bitcoin futures are currently
regulated by the SEC and have been trading since January of 2018. Both the Chicago Mercantile
Exchange and the Chicago Board of Options Exchange have listed bitcoin futures. The SEC is evaluating
ETFS created by VanEck and SolidX.
The benefits of a bitcoin ETF will likely outweigh the costs. An ETF will provide additional access to the
retail investment community. A bitcoin ETF will track the movements of Bitcoin, but investors will not
need to open a bitcoin account. This is an indirect way of purchasing bitcoin as the ETF will only hold
bitcoin and the trust that holds the assets will buy and sell bitcoin based on the value of the holding in
the trust. Many retail investors do not have access to futures account and do not want to open a new
bitcoin account. For those who are interested in investing in Bitcoin, a retail ETF is a good solution. The
VanEck ETF is currently set at a very high level, reaching $200,000. This could attract more institutional
investors than retail investors.