Cryptocurrency is a young asset class. Over its brief life span, it’s developed a reputation for sharp price action in both directions. Bitcoin is a case study in that trait.
Dramatic, short-term declines by bitcoin have a way of unnerving smaller investors. This is especially so when it puts newly initiated positions at immediate deficits. That underscores the utility of equity-based crypto plays, including the Invesco Alerian Galaxy Crypto Economy ETF (SATO) and the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC).
Those Invesco exchange traded funds could be relevant to smaller investors seeking crypto/bitcoin exposure. This is the case because bitcoin’s recent price action has been weak. Since popping above $30,000 on speculation, regulators could finally approve a U.S.-listed spot bitcoin ETF, the largest digital currency has stumbled, recently sliding below $27,000.
BLKC, SATO Could Help New Bitcoin Investors
BLKC, SATO and other equity-based crypto ETFs are not foolproof avenues for accessing digital currencies. In particular, SATO holdings are often highly correlated to bitcoin prices. Still, the ETFs could be safer avenues for short-term holders (STH) seeking crypto exposure.
“STHs, which correspond to entities holding coins for 155 days or less, have seen their aggregate cost basis fail as market support,” reported William Suberg for Cointelegraph. “As Glassnode notes, as of Sep. 17, the cost basis for those not spending BTC is now $28,000 — around 5% above current spot price.”
Many bitcoin newbies aren’t buying significant stakes in the cryptocurrency right off the bat. Their behavior is relevant because data indicates smaller bitcoin investors who see quick profits are apt to add to their positions, while counterparts on the other end of the spectrum become skittish about buying more.
“From this perspective, we can see that the cost basis of STHs who are spending fell below the cost basis of holders as the market sold off from $29k to $26k in mid-August,” according to Glassnode.
Additionally, smaller crypto market participants are pertinent in terms of gauging market sentiment. On that note, bitcoin market sentiment is currently dour because so many new entrants are in the red on their positions.
“This has resulted in a negative shift in sentiment, with investors spending now having a lower cost basis than the rest of the cohort. This suggests a degree of panic is dominating this group, which is the first time since FTX collapsed,” added Glassnode.
For more news, information, and analysis, visit the Crypto Channel.