Bitcoin and ether experience steep ascend this year
Bitcoin (BTC) and Ethereum network’s ether (ETH) prices both hit all-time highs before falling sharply in recent days. Meanwhile, competing cryptocurrencies have made wild rises this year to challenge the two leading cryptocurrencies. Many believe bitcoin and ether prices will continue to march towards new highs. Others say cryptocurrencies are in a bubble and the chance of collapse is high.
However, one thing is certain: cryptocurrencies are a new asset class and volatility will be strong for years to come, assuming they remain the focus of attention. Volatility is a friend of the trader, and both BTC and ETH products can be traded in Finland with securitized derivatives without the need to go on an adventure on cryptocurrency exchanges.
With Vontobel's mini-futures, an investor can seek returns on both rising and falling BTC and ETH futures. Mini-futures are traded in the same way as shares - on a stock exchange through a Finnish stockbroker and are subject to capital gains tax, like shares.
The features of mini-futures include:
- - Ease of trading: Mini-futures can be traded in euros from a book-entry account like shares on a stock exchange without the need to look for a suitable cryptocurrency exchange.
- - Market risk and leverage: Investors bear the market risk of the underlying cryptocurrency. As a result of the leverage in the products, they offer higher returns but the risk of losses is also higher.
- - Currency: The underlying asset is quoted in US dollars, so the buyer of the mini-futures assumes the exchange rate risk when trading BTC and ETH mini-futures.
- - Transparent pricing: the price of the mini-futures follows the price of the underlying asset (subject to the leverage and product costs).
- - Competitive spreads: The spreads for Vontobel's BTC and ETH mini-futures start at around 0.4 percent.
- - Risk of losses: Unlike conventional futures trading, the loss from mini-futures is limited to the capital invested. However, investors may suffer a total loss of their capital invested. There is no capital protection.
- - Choice of risk level: From Vontobel's product range, a trader can choose the level of risk that suits his strategy. The most moderate mini-futures offer less than double leverage and the riskiest offer about 5-6 times leverage. The leverage of mini-futures is dynamic, ie it depends on the ratio of the price of the underlying asset to the exercise price of the mini-futures.
- - Credit risk of the issuer: Investors in mini-futures bear the credit risk of the issuer (its ability to meet the obligations under the products).
The following is a brief overview of the current market situation for bitcoin and ether.
Bitcoin survives scare in China
Bitcoin has almost doubled in value over the past year, with a return of about 95 percent since the beginning of January.
Along the way, in early November, Bitcoin made an all-time high of $ 68,789.
However, the peak is windy and its price fell back to $ 56,000 a week, where it is currently trading.
Price in USD
Note: Historical returns are not a reliable indicator of future returns.
For several years, China has banned the use of bitcoin and other cryptocurrencies in its country. This year, however, it decided to take its anti-cryptocurrency campaign to a new level and also banned the mining of bitcoin in its country. Until then, China was one of the leading bitcoin miners due to cheap cost energy.
The ban led to a sharp drop in bitcoin's hash rate, the computational power required for mining and transaction processing, according to a Cointelegraph article.
Despite Chinese action, the Bitcoin network has managed to bring the hash rate back to near pre-ban levels. Many of the miners operating from China simply moved to a new location where cheap energy is abundant. The recovery of hash rate can be seen as a significant victory for the resilience of the Bitcoin network against outside factors. However, the ban also highlights the risks involved.
Contrary to the previous trend, bitcoin miners have not sold the bitcoins they mined since May, but entered them in their balance sheets for later use.
Source: Cryptoquant.com
Note: Historical returns are not a reliable indicator of future returns.
Vontobel's MFL BTC1 V77 mini-future offers the investor the opportunity to seek returns as the price of the Bitcoin future rises. At the time of writing, the mini-future in question provides a 3.84-fold leverage for Bitcoin future. When the price of a bitcoin future rises by one percent, the value of a mini-futures rises by 3.84 percent. The leverage works in both directions, as when the price of a Bitcoin future falls by one per cent, the value of the mini-future falls by 3.84 per cent.
The MFS BTC1 V11 mini-future, in turn, can be used to pursue returns at Bitcoin’s declining future rates. It offers a 2.59-fold leverage for Bitcoin future at the time of writing. When the price of a bitcoin future falls by one per cent, the value of the mini-future rises by 2.59 per cent. If, on the other hand, the price of a Bitcoin future goes up by one percent, contrary to investor expectations, the return on the mini-future will be negative 2.59 percent.
Vontobel is listing new mini-futures as the price of the Bitcoin futures moves, so it is constantly offering a wide range of products with different risk profiles.
Ether experienced a sharp rise in price during the year
The return on the Ethereum network's cryptocurrency, ether, for the current year is a staggering 455 percent.
Ether started the year with trading at about $ 737. Like Bitcoin, ether made an all-time high of $ 4,868 in early November.
Price in USD
Note: Historical returns are not a reliable indicator of future returns.
According to a Cointelegraph article, the price of the ether has been supported by the supply squeeze, ie the number of ETH coins in free circulation is constantly shrinking for various reasons.
First, the Ethereum network has taken its place as a leading smart-contracts platform and those who have invested in ether believe in its long-term potential. Thus, they remove their ether from the cryptocurrencies into a cold store as they keep holding the asset.
Second, the upgrade of the Ethereum network in early August, EIP-1559, started to partially burn the transaction costs of the network. This has led to a shrinking amount of ethers in circulation, putting price pressure on the price of ether. According to the website “Watch the Burn”, nearly a million ETH coins have already been burned as a result of the upgrade.
Third, the Ethereum network is preparing for a change in the consensus mechanism from proof-of-work (PoW) to proof-of-work (PoS). In preparation for the change, ETH holders will be able to stack 32 ether on the official PoS-smart contract and earn ETH revenue, thereby increasing their holdings.
By the beginning of October, there were already 7.82 million ETH staked. Staking removes the ether from free circulation and trading. The number corresponds to about 6.6 percent of all circles in circulation. At the time of writing, it equates to $ 32 billion.
Note: Historical returns are not a reliable indicator of future returns.
Vontobel's mini-futures MFL ETH V24 will yield profit as the ether future price rises. It offers a 2.61-fold leverage when writing an article on ether future, meaning the mini-future yields 2.61 percent when the price of ether futures goes up by one percent. Correspondingly, with the price of ether futures falling by one per cent, the mini-future will produce a loss of 2.61 per cent.
The MFS ETH V54 mini-futures allows you to pursue returns as the price of an ether futures drops. If the price of an ether futures falls by one percent, the value of the mini-futures rises by 3.43 percent. In other words, the leverage of that mini-future is 3.43 times. If the price of the ether futures goes up by one per cent, the loss for the mini-future will be 3.43 per cent.
Risks
This information is neither an investment advice nor an investment or investment strategy recommendation, but advertisement. The complete information on the securities, in particular the structure and risks associated with an investment, are described in the base prospectus, together with any supplements, as well as the final terms. It is recommended that potential investors read these documents before making any investment decision. The documents and the key information document are published on the website of the issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany, on prospectus.vontobel.com and are available from the issuer free of charge. The approval of the prospectus should not be understood as an endorsement of the securities. The securities are products that are not simple and may be difficult to understand. Past performance is not a reliable indicator of future performance.