Investors can now punt on bitcoin via the ASX. But this won’t make the cryptocurrency any more useful for making payments, or remove the well-known risks.
of Mexican fast-food chain Guzman y Gomez this week, there was some other financial news you may have missed. ASX investors not only gained the ability to buy shares in a burrito business, they also obtained a new way to punt on the price of bitcoin.
However, at the same time, it doesn’t remove any of the well-known risks of cryptos. Investing in a bitcoin ETF will remain highly risky because of the massive swings in the cryptocurrency’s price – moves of 10 per cent a day are not uncommon, and bitcoin’s price is up 50 per cent so far this year. People from across the technology and financial world have spent years debating the usefulness of cryptocurrencies for as long as they’ve been around. Could they challenge traditional money issued by commercial banks and central banks? Or is their main appeal that they might make you rich?The truth is no one knows how cryptos might eventually change the world of payments and money. That topic will probably be debated for decades and, throughout history, money has continually evolved.
Packaging up bitcoin into an ETF should mean there are certain minimum standards about how the fund holds those assets. The ASX this week said each unit of the bitcoin ETF would correspond with a certain number of bitcoin.However, will it make crypto any less volatile as an investment? No – that’s not the point.
For common tasks such as moving money overseas, for example, the traditional banking system is still far too expensive. The Reserve Bank’s head of payments policy Ellis Connolly this week said payments cost 5 per cent to 6 per cent of the transaction price on an overseas purchase. While Connolly didn’t discuss digital currencies, they could eventually help to lower those costs.
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