Bitcoin continued to match the moves of the broader stock market as its price faltered amid a hot inflation report that sent the Dow Jones Industrial Average tumbling as much as 1,200 points during Tuesday’s trading session.
“U.S. inflation decelerated in August, but remained higher than what economists had expected, a sign that the U.S. Federal Reserve will stay aggressive in raising interest rates,” a Coindesk report noted.
“The consumer price index rose 8.3% in August from a year earlier, a mild slowdown from the 8.5% reported for July,” the report added further. “Economists at FactSet had forecasted a 8.1% increase, and so the number was slightly higher than expectations.”
Stocks, bonds, and digital currencies have all been under the mercy of inflation as well as the interest rate hikes of the U.S. Federal Reserve this year. With a hot inflation report, the obvious move would be more rate hikes as the capital markets expect another 75-basis point hike at the next Fed meeting.
“The release can potentially be a dial mover for how hawkish Chair Powell’s press conference will be and by extension the direction of risk sentiment and market pricing in the near term,” said Anthony Woodside, senior solutions strategist at LGIM America, a global institutional asset manager.
Report: Bitcoin ETF Long Overdue
In the meantime, lobbyists of bitcoin are pushing for the passage of an exchange traded fund (ETF) directly linked to bitcoin. Lobbyists are taking aim at the Securities and Exchange Commission (SEC), in particular, for its numerous refusals to approve a bitcoin ETF.
“It has determined that the American public cannot yet handle the responsibility of familiar, cost-effective, liquid, transparent and regulated access to the bitcoin markets,” the Chamber of Digital Commerce said in a report, saying that the SEC is depriving investors and forcing them to seek opportunities abroad. “The SEC continues to force U.S. investors who wish to invest in this transformative asset class into unregulated or foreign alternatives.”
There is another alternative: Investors can also opt for getting exposure to futures contracts in bitcoin via the ProShares Bitcoin ETF (BITO). With cryptocurrency regulation still in its infancy, BITO will allow investors to get bitcoin exposure on a traditional market exchange, thereby reducing the risk of a public exchange going out of business.
Furthermore, BITO is actively managed, giving investors dynamic exposure to the bitcoin futures market. This puts portfolio management in the hands of market professionals who can increase or reduce exposure to contracts, given the current nature of the ever-changing, volatile crypto market.
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