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Bitcoin on financial markets: what you need to know
The news that Bitcoin can now be purchased via index funds means that it can now be considered as a real investmentsaid Tec de Monterrey Professor Francisco Orozco.
This January 10, the United States Securities and Exchange Commission (SEC) approved the operation of first ETF (Exchange Trade Fund) linked to Bitcoin.
“(This means) there will be an opportunity, when it is on the exchange, to buy Bitcoin through these ETFs,” said Orozco, who also directs the Tec Center for Access, Inclusion and financial research (FAIR) in Monterrey.
CONECTA shares his explanation in detail so that you can better understand this new.
What is the cryptocurrency Bitcoin?
Orozco explained that following the 2008 crisis, the financial system developed credibility problems, which triggered the rise of Bitcoin.
“There, someone or something called Satoshi Nakamotobecause it is not yet clear whether it is a person or a community, produced Blockchain, the data chain on which this cryptocurrency is based.
A cryptocurrency is a digital currency that does not depend on any government or central bank.
It is based on Blockchain Technologywhich is a decentralized recordkeeping system that uses cryptography to secure transactions.
“This data has decentralized validation, which generated the currency that evolved as a means of payment,” he said.
Orozco pointed out that it is not the only cryptocurrency, as there are others, such as Ethereum.
Bitcoin as a speculative asset
Orozco said that over time, the vision of using Bitcoin as a means of payment was lost in favor of using it as a means of payment. means of speculation.
“The price of Bitcoin was set based on supply and demandunlike a stock, which relies on the generation of future flows, sales analysis, expectations, etc.
“(Bitcoin) is completely speculative. No matter how many models are created to project or predict Bitcoin values, it is impossible. Ultimately, it’s very unpredictable, there’s a lot of uncertainty and it’s very volatile.”
In 2017, it was worth 400,000 pesos. Two years later, it reached 1 million pesos, then its value fell to 300,000 pesos, he said.
“This approval is important because it provides investors with a more regulated and accessible way to gain exposure to Bitcoin.”
What is an ETF or index fund? Explanation in detail
Orozco describes an ETF, or exchange traded fund as if it were a fruit basket for didactic purposes.
“Imagine that the the basket represents the ETF and each type of fruit in the basket is a different investment, such as stocks, bonds or commodities.
He added that just like a basket of fruit offers a variety of pears, apples, grapes, and more, an ETF contains a variety of financial assets.
“For example, let’s say you have a fruit basket (ETF) that specializes in red fruits. This basket will include red apples, strawberries, cherries and more.
“Similarly, a technology ETF would include shares of several technology companies like Apple, Microsoft and Google.
Orozco said that by buying a portion of the ETF, you are buying a small portion of all the fruit (stocks) in the basket, allowing you to diversify your investments And reduce risks.
“In the same way that you can buy and sell fruit in a market, you can buy and sell ETF shares on the stock market,” he said.
Orozco said that from now on, ETFs containing Bitcoin have been created on the American stock exchange.
What does it mean that Bitcoin can be purchased on an exchange?
According to Orozco, this news is a way to regulate Bitcoin so that more people adopt it.
“This approval is important because it provides investors with a more regulated and accessible way to gain exposure to Bitcoin, which could lead to increased adoption and greater stability in the cryptocurrency market.“
He said this previously, Wallets were used to purchase a Bitcoin, whether centralized or decentralized, permissioned or not.
Finally, the professor emphasized that Bitcoin is a new way of investing.