Bitcoin exchange-traded funds (ETFs) could exponentially increase Bitcoin’s value, says cryptocurrency expert Fred Krueger. This potential surge connects to billionaire George Soros’ reflexivity theory, which holds market prices and investor outlooks fuel each other’s growth in positive feedback loops.
In his influential book, “The Alchemy of Finance,” Soros explains reflexivity as a principle. Reflexivity argues that asset prices rise when more investors show optimism towards them, and this, in turn, creates increased demand, leading to higher prices.
Krueger thinks that this idea holds for Bitcoin exchange-traded funds, which are investment vehicles mimicking Bitcoin’s price and enabling its acquisition and disposal on stock markets. Mr Krueger also anticipates a rising Bitcoin price due to increased Wall Street money going into Bitcoin ETFs, thus attracting more investors through positive feedback.
The gold market differs from this process in that ETFs didn’t impact the price of gold. According to Krueger, it’s because only 1.5% of the total gold market is made up of gold ETFs, whereas Bitcoin ETFs can be about 3.5% of the total Bitcoin market. Consequently, there is a possibility that Bitcoin ETFs may exert more reflexivity on cryptocurrency price than what has been stipulated above through reflexiveness itself.
In his analysis, Krueger asserts that numerous experts have neglected an important consideration, leading them to undervalue the potential effect of Bitcoin exchange-traded funds through analogies to gold ETFs. He states Bitcoin possesses unique attributes with distinct dynamics and drivers within the developing cryptocurrency space.
Bitcoin ETFs changing Are Changing Investment Landscape
Bitcoin exchange-traded funds are not only a theoretical possibility but also a reality that is gaining momentum and popularity among investors. According to Eric Balchunas, a senior ETF analyst, Bitcoin exchange-traded funds are the “portfolio’s hot sauce” that can spice up the returns and diversification of any portfolio.
The evidence for this is the rapid growth and adoption of Bitcoin ETFs, especially in the US, where the first Bitcoin ETF was launched in January 2024. Since then, the top Bitcoin ETFs have seen their net cumulative flows double to over $3 billion in just a few days, a remarkable feat compared to gold exchange-traded funds’ slow and steady growth.
This shows that investors are shifting their preferences and strategies and are choosing Bitcoin over gold as a hedge against inflation and uncertainty. This could mark the beginning of a new era where Bitcoin challenges and surpasses gold as the preferred store of value and safe haven in the traditional investment world.
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