Thus, investing in bitcoin futures contracts through BITO allows investors to better profit from short-term price movements regardless of the long-term direction and this is helped by the fact that crypto enjoys international recognition, making it suitable for everyone at anytime and anywhere in the world.
The risks and the long term rationale
However, keeping and paying with bitcoin comes with risks as the value of a currency is largely dependent on people’s trust. The trust level shot up with the events in Ukraine mainly due to erosion in confidence in traditional or fiat currencies caused by uncertainty. However, cryptocurrencies remain largely unregulated, extremely volatile, and not completely immune to hacker attacks due to the fact that they are digital in nature.
Still, relativizing risks, I consider that in view of heightened tensions in Ukraine, high-inflation concerns in Europe due to rising energy costs, and the euro losing ground against the dollar, there are more opportunities for bitcoin which is based on blockchain software residing on a decentralized network of computers around the globe.
Thus, virtually available bitcoin now looks relatively less vulnerable compared to physical currencies sitting in central banks whose dollar assets may not prove useful when most needed, depending on whether their leadership is aligned with the West.
The above factors should gradually contribute to making crypto assets more central to finance and payments.
Therefore, given the possibility of other countries being sucked into the conflict, there could be wider adoption of crypto somewhat similar to El Salvador where there was a decision to adopt bitcoin as legal tender last year. Even if governments do not go that far, some Eastern European leaders may order their central banks to diversify some of their dollar assets into bitcoins as a precautionary measure.
There is another factor that should increase demand for digital assets.
For this purpose, in addition to the crowd funding aspect, whereby the objective is to raise funds from common people for supporting Ukrainians, there are also projects based on Non-Fungible Tokens or NFTs.
Thus, OpenSea, the largest NFT marketplace is hosting a collection of unique artworks by Artists for Peace and collectors can bid for about 60 pieces in Ethereum (ETH-USD) with the proceeds going towards supporting the Ukrainian people. Now, Ethereum is different from bitcoin, but, as the second cryptocurrency by market valuation, its wider usage should give support to the crypto world in general.
Coming back to BITO, for those who have held to their investments, the ETF represents a safe way to remain invested in the cryptocurrency without risk of theft or misappropriation.
Finally, my bullish stance is firstly reinforced by crypto breaking its correlation with (or decoupling from) the tech sector as I had initially pointed out in my article on the Grayscale Ethereum Trust (OTCQX:ETHE) two weeks earlier. Hence, BITO (in blue) is now outperforming the Invesco QQQ Trust (QQQ).
