ETFs on Bitcoin

Good Morning Ladies and Gentlemen

“Do people become unhappy when they are full and unthreatened?.”
anonymous

Introduction

Ladies and Gentlemen, I was asked to participate in a short interview for the Swiss-French Magazine “BILAN” by its former editor-in-chief. The topic was BlackRock’s and Templeton’s application for licenses to issue Bitcoin ETFs. I had the questions and my answers translated for your convenience.

BlackRock and Templeton have applied to the SEC for a license to issue Bitcoin cash ETFs. What do you think of their potential?

I am convinced there will be interest and, therefore, a market for it. Two large, well-known providers offering tradable and regulated products on a crypto-currency that has until now been little or unregulated will certainly attract investor interest. We must not forget, however, that Bitcoin, i.e., the underlying asset, is still largely anonymous, unregulated and relatively unknown.

If these products were approved, would it be bullish for BTC by creating demand from institutional investors?

I think BlackRock and Templeton have enough investors in their networks who can get excited about investing in such products. As the ultimate number of Bitcoins remains limited, additional investors should, under normal circumstances, lead to additional demand, and while supply rests unchanged, this would, I assume, lead to a price rise.

What could be the risks for investors?

To be honest, the data on Bitcoin is a bit thin. So far, we do not know who created the network. We still do not know who invented the Bitcoin cryptocurrency and who hides behind the pseudonym Satoshi Nakamoto. On the other hand, we do know who is behind the much-maligned U.S. dollar, the euro and the Swiss franc. Behind all these FIAT currencies, there are national economies with citizens, territories, companies, a tax base, and so on. What do we know about Bitcoin? We know that the Bitcoin white paper was published in October 2008 and that the first version of the Bitcoin Core reference implementation was published in January 2009. We also know that the network consumes a great deal of electricity and that Bitcoin transactions can be processed 24 hours a day, anonymously and free of charge, in a largely unregulated framework. The risks are, therefore, of a different nature. Because we do not know who is behind the network, we cannot know whether it is an intelligent individual or maybe a criminal organisation. Moreover, financial market regulations (anti-money laundering act, anti-tax evasion policy, etc.) may suddenly lead to increased demand for transparency or, depending on the state, even a total ban on crypto-currencies. Who knows?

Which clients should be advised to use this type of product?

The underlying of such pure Bitcoin products have no intrinsic value. This is why I would, if at all, only recommend such products to investors who can handle high volatility and even live with a total loss.

Recession?

Ladies and Gentlemen, I still receive many messages on the recession topic, mainly because Germany is in a recession; Switzerland is slowly but surely going in the direction of zero growth, and despite the Fed’s aggressive interest increases, the U.S. economy is still comfortably growing. Yes, there is this massive gap between the U.S. and Germany. The reasons I like to look at the U.S. numbers while working in Liechtenstein, living in Switzerland and mainly investing in Europe is that not only the data published by the U.S. government, the Fed, etc. is vast and easy to access, but, and this is probably very important to most investors anywhere, the U.S. financial markets play the leading role in global financial markets and therefore have a significant influence on most other financial markets across the globe. In any case, it seems some economists have postponed the projection of a U.S. economic downturn because of the immense spending programmes by the U.S. government that are likely to take more and more effect in the months and years to come.

Your point of view

Ladies and Gentlemen, please share your opinion with me, but please remember (instead of hitting the reply button) to send your messages to: smk@incrementum.li.
Many thanks, indeed!

I wish you an excellent start to the day and a wonderful weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 102
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li