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⚡Fidelity's Take on Bitcoin💯

Croxroad

12 Oct 2023 — 4 min read

☕️ GM Dear Plebs!

Here is Crox Road, your daily dose of orange pill that will turn you into a Bitcoin Maxi.

The menu for today:

💠Why Bitcoin Stands Apart

Fidelity Digital Assets, a division of the renowned financial services company Fidelity Investments, made a noteworthy statement last week about Bitcoin. They described Bitcoin not as a cutting-edge technology but as a valuable monetary asset and a compelling store of value in our increasingly digital world. This perspective challenges the conventional thinking of many traditional investors who tend to view Bitcoin through a technology lens. Fidelity's analysts, Chris Kuiper and Jack Neureuter, noted that this perspective often leads to the mistaken belief that Bitcoin, being a first-mover technology, will easily be overtaken by a superior cryptocurrency or generate lower returns. In essence, Fidelity is highlighting Bitcoin's unique role as a digital store of value, setting it apart from the typical technology-driven cryptocurrencies.

The authors emphasize a crucial point: Bitcoin didn't first distinguish itself as a superior payment technology; instead, its initial breakthrough was as a superior form of money. They contend that Bitcoin stands fundamentally apart from all other digital assets, asserting that other cryptocurrencies are unlikely to surpass Bitcoin's status as a monetary asset. The key reasons behind this are Bitcoin's unmatched security, decentralization, and its reputation as a reliable digital currency. In essence, Bitcoin's unique characteristics make it exceptionally well-suited to serve as a solid and dependable form of digital money, setting it apart from the rest.

The report makes a compelling case that the success of the Bitcoin network doesn't undermine the potential success of other networks in the digital asset ecosystem. It argues that these networks can cater to distinct needs or solve different problems that Bitcoin might not address. According to the report, Bitcoin's investment outlook is influenced by two significant factors: the overall growth of the broader digital asset ecosystem and the possible instability of traditional macroeconomic conditions. It further suggests that Bitcoin should be regarded separately from all other digital assets that have emerged in its wake, positioning it as the entry point for traditional investors seeking exposure to the sector. In essence, the report underscores the idea that Bitcoin's success doesn't preclude the success of other digital assets, as they can each serve unique roles within the broader ecosystem.

📄 ARK Invest Responds to SEC

ARK Invest has made revisions to its proposal for a spot Bitcoin exchange-traded fund (ETF) by submitting an amendment to the U.S. Securities and Exchange Commission (SEC) on October 11th. This update now includes information about Coinbase's custodial practices, emphasizing that the fund's assets are stored in separate addresses on the Bitcoin blockchain. It's crucial because it ensures that ETF assets are distinct from the company's own assets or those of its customers. The SEC had previously expressed concerns about the lack of surveillance-sharing agreements in spot Bitcoin ETF applications. To address this, several applicants, including ARK Invest, have added an agreement with Coinbase through amendments submitted in July. These changes aim to meet the SEC's expectations and pave the way for the approval of a Bitcoin ETF.

In the updated application, ARK Invest acknowledges that certain valuation methods employed by the fund don't align with U.S. generally accepted accounting principles (GAAP). Additionally, the filing touches upon concerns related to illicit activities involving cryptocurrencies. It highlights the potential risk that if cryptocurrencies are increasingly used in illegal transactions or perceived as such, it could impact the value of the ETF negatively. There's also a section in the filing that delves into Bitcoin mining and its electricity consumption, acknowledging that environmental factors, government regulations, fluctuating energy prices, and the closure of mining operations could all have an influence on the price of Bitcoin and subsequently affect the value of the proposed ETF. These points underline the complex dynamics and potential risks associated with Bitcoin ETFs.

It appears that ARK Invest's recent update to its Bitcoin ETF proposal is a response to a process initiated by the SEC a few weeks ago. The SEC had asked for comments on proposals from several firms, including BlackRock (iShares), Valkyrie, Invesco Galaxy, and BitWise, with BitWise receiving more extensive scrutiny. Even though ARK Invest wasn't initially under the SEC's specific request, it seems their update addresses some of the concerns the SEC has raised in this ongoing review process. It's worth noting that, as of now, the SEC has not granted approval for a spot Bitcoin ETF. However, the agency did approve Bitcoin futures ETFs in 2021 and more recently, Ethereum futures ETFs. The development of Bitcoin ETFs remains a closely watched and evolving matter in the financial world.

🪦 Inverted Head and Shoulders

The inverted head and shoulders pattern is a more advanced technical analysis tool used in conjunction with other indicators to make informed trading decisions. It takes shape when an asset's price reaches a specific level, retraces, and then approaches that level once more. Typically, this chart pattern is seen as bullish, and it provides a buy signal, indicating that an uptrend is likely to persist. As the name suggests, it's the opposite of the traditional head and shoulders pattern, which is bearish and indicates a potential trend reversal. So, when you spot an inverted head and shoulders, it suggests a potential upward trend continuation in the price of the asset. However, like all technical analysis tools, it's generally more effective when used in combination with other indicators to confirm your trading decisions.