Fed Could Boost Case for This Bitcoin ETF
Following a brutal October and a mostly turbulent November, bitcoin found some relief during Thanksgiving Week, rising about 7%. That could be the start of a more substantial rebound. And that could be by supported by the Fed potentially lowering interest rates in December. Should that happen, ETFs such as the NEOS Bitcoin High Income ETF (BTCI) could benefit.
The $820.5 million BTCI, which debuted 26 months ago, brings income to the bitcoin equation. It does so in noteworthy fashion, as highlighted by the actively managed ETF’s 30-day SEC yield of 28.36%. BTCI is a covered call ETF, so its income stream isn’t heavily dependent on Fed policy. But it does offer some upside potential should bitcoin oblige, indicating if the Fed plays ball, BTCI could notch some December gains.
Bet on BTCI If Fed Lowers Rates
With tens of billions of long bitcoin positions having been liquidated over the past two months, the largest digital currency has been under duress. But the Fed could ameliorate that scenario.
“The scale of this pullback is the market’s response to uncertainty, not a collapse in underlying demand. Many investors have been reducing exposure because they lack clarity on the Federal Reserve’s next move, among other reasons,” noted deVere Group CEO Nigel Green. “Once that clarity arrives, positioning will likely shift quickly.”
The good news for BTCI investors is that after weeks of markets pricing in diminishing likelihood of a December rate cut, that script flipped. Now, the prevailing wisdom holds that it’d be surprising if the Fed doesn’t pare borrowing costs this month.
As noted above, BTCI’s stout income stream isn’t dependent on the Fed. But explaining Fed-related bitcoin movements is easy. It largely boils down dollar weakening and lower real yields.
“The scale of this pullback is the market’s response to uncertainty, not a collapse in underlying demand. Many investors have been reducing exposure because they lack clarity on the Federal Reserve’s next move, among other reasons. Once that clarity arrives, positioning will likely shift quickly,” added Green.
Speaking of cash investments, instruments such as CDs and money markets will look less attractive the farther rates fall. That could compel some risk-tolerant investors to embrace ETFs such as BTCI. Additionally, a case can be made bitcoin remains in a bull market.
“When structural demand meets improving liquidity, the effect is amplified. Bitcoin has already shown this repeatedly across multiple cycles. The drawdown does not erase that dynamic,” concluded Green.
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