MCViewPoint

Opinion from a Libertarian ViewPoint

Wall Street Is Setting a Trap For Bitcoin Buyers | The Libertarian Institute

Posted by M. C. on October 29, 2021

Even when people stand to take delivery in gold there have been multiple instances where cash-settlement was forced on the buyer, presumably because the gold wasn’t there.

FYI, it’s in the contract. The COMEX reserves the right to NOT DELIVER gold. Force majeure is a thing, even in the United States.

https://libertarianinstitute.org/articles/wall-street-is-setting-a-trap-for-bitcoin-buyers/

by Tom Luongo

So Tuesday October 19th, 2021 was supposed to be the day that changed everything for bitcoin.

And it may, just not in ways anyone bullish on crypto should be comfortable with.

Finally the SEC approved a Bitcoin ETF, the ProShares Bitcoin Futures ETF (BITO) began trading this week to great fanfare in the cryptocurrency community. There was much rejoicing as Bitcoin hit a new all-time high which it has since given back.

On the heels of that announcement Valkyrie changed the proposed ticker symbol for its Bitcoin Strategies ETF, another futures-based product, to BTFD. Gotta love the cheek, there.

And while that’s all well and good, I have to tell you that I have sincere reservations about popping the virtual champagne here.

Because I’ve seen this story before…in gold and silver.

I remember those heady days when all the gold bugs thought an ETF would be just the thing to solve the ‘liquidity’ problem gold had. At the time they didn’t want to hear that this lack of liquidity was one of those good problems gold and silver had.

Once people dug into the prospectus of the proposed SPDR Gold ETF, which has since then changed its name to SPDR Gold Shares ETF, they found that GLD didn’t have to hold physical gold of any particular quality. They could hold the dreaded ‘paper gold.’

That was the key to these funds being just another layer of the Matrix.

They opened up those markets to another sink to drain demand into a black hole of infinite ‘liquidity’ which in the end did nothing to help the price of gold. In fact, just the opposite occurred. It took pressure off the physical spot market and the forex trading of gold and dumped billions of unsuspecting retail investors into the Midgewater Marshes of Wall St.’s hyper-financialization engine.

Or does no one remember the definition of ‘Getting Corzined?”

So, will that happen with bitcoin since these ETFs are even less tied to the underlying commodity than GLD and SLV? Before I answer that, let’s back up and set up some boundary conditions.

This ETF will trade and settle only in front-month Bitcoin futures contracts traded on the CME. These are cash-settled contracts that bear no relation to actual commodities futures contracts where the buyer is pledging to take delivery of a defined-amount of say, soybeans, and the the seller is pledging to deliver that amount of soybeans by a certain date.

In these contracts there is no delivery of bitcoin, the underlying commodity, here.  The only thing delivered is cash.

See the rest here

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