Francisco Orozco found this approval significant, as it offers investors more regulation and accessibility to Bitcoin.
By José Longino Torres | CONECTA National News Desk - 01/12/2024 Photo Shutterstock

The news that Bitcoin can now be purchased through index funds means that it can now be considered a real investment, said Tec de Monterrey professor Francisco Orozco.

This January 10, the U.S. Securities and Exchange Commission (SEC) approved the operation of the first ETF (Exchange Trade Fund) related to Bitcoin.

“(This means) there will be an opportunity, when it is on the stock exchange, to buy Bitcoin through these ETFs,” said Orozco, who also runs the Tec’s Center for Financial Access, Inclusion, and Research (FAIR) in Monterrey.

CONECTA shares his explanation in detail so that you can better understand this news.




What is the cryptocurrency Bitcoin?

Orozco explained that in the wake of the 2008 crisis, the financial system developed credibility problems, which triggered the rise of Bitcoin.

“Out there, someone or something called Satoshi Nakamoto, because it’s not yet known if it’s a person or a community, produced Blockchain, the data chain this cryptocurrency is based on.”

A cryptocurrency is a digital currency that is not reliant on any government or central bank.

It is based on Blockchain technology, which is a decentralized record-keeping system that uses cryptography to secure transactions.

“This data has decentralized validation, which generated the currency that evolved as a means of payment,” he said.

Orozco pointed out that it is not the only cryptocurrency, as there are others, such as Ethereum.


Bitcoin as a speculative asset

Orozco said that as time went by, the vision of Bitcoin being used as a means of payment was lost to being used as a means of speculation.

“The price of bitcoin was set based on supply and demand, unlike a stock, which is based on future flow generation, sales analysis, expectations, and more.

“(Bitcoin) is totally speculative. No matter how many models are created to project or forecast Bitcoin values, it’s impossible. In the end, it’s very unpredictable, there’s a lot of uncertainty and it’s very volatile.”

In 2017, it was worth 400,000 pesos. 2 years later, it reached 1 million pesos, then the value dropped to 300,000 pesos, he said.


“This approval is significant, as it offers investors a more regulated and accessible way to gain exposure to Bitcoin.”


What is an ETF or index fund? Explanation in detail

Orozco described an ETF, or Exchange Traded Fund as if it were a basket of fruit for didactic purposes.

“Imagine that the basket represents the ETF and each type of fruit inside the basket is a different investment, such as company stocks, bonds or commodities.”

He added that just as a fruit basket offers a variety of pears, apples, grapes, and more, an ETF contains a variety of financial assets.

“For example, let’s say you have a fruit basket (ETF) that specializes in red fruits. This basket will include red apples, strawberries, cherries, and more.

“In the same way, a technology ETF would include shares of several technology companies such as Apple, Microsoft, and Google.”

Orozco said that by buying a portion of the ETF you are buying a small portion of all the fruit (shares) within the basket, which allows you to diversify your investments and reduce risk.

“In the same way you can buy and sell fruit in a market, you can buy and sell ETF shares in the stock market,” he said.

Orozco said that as of now, ETFs containing Bitcoin have been created on the U.S. stock exchange.




What does it mean that Bitcoin can be bought on the stock exchange?

According to Orozco, this news is a way to regulate Bitcoin so that more people will adopt it.

“This approval is significant, as it offers investors a more regulated and accessible way to gain exposure for Bitcoin, which could lead to increased adoption and greater stability in the cryptocurrency market.

He said that previously, Wallets were used to purchase a Bitcoin, whether centralized or decentralized, as well as authorized or unauthorized.

Finally, the professor pointed out that Bitcoin is a new way of investing.




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