The recent surge in the anticipation of a possible bitcoin exchange-traded fund (ETF) has caused a significant increase in the price of the digital asset. However, not everyone is thrilled about this development. Some critics argue that a spot bitcoin ETF could make BTC vulnerable, just like the gold and silver markets. They also warn that the approval of such an ETF could pave the way for manipulative practices that mirror those observed in the precious metal markets.
Bitcoin ETF and the Threat of Gold-Like Manipulation
On the surface, a physical bitcoin ETF appears to be a significant advantage for the growth and valuation of cryptocurrency. However, there are fears that it could replicate the patterns seen in gold and silver ETFs, using non-existent BTC supplies as a tool for futures leverage. This could lead to sudden price increases being offset by the release of this fabricated supply. Instead of buying real bitcoin, investing in a bitcoin ETF would not reduce the actual supply. This could result in ETF operators leveraging positions far beyond their verifiable assets, swaying prices.
Josef Tětek, a BTC analyst at Trezor, expressed his concerns on October 16, 2023, stating that an "ETF is fiatization of bitcoin." He further stated that he believes a bitcoin ETF could potentially harm BTC in the long run. He asserted that a bitcoin ETF could hinder bitcoin adoption, as it is an attack on self-custody, replacing actual usage with naive price speculation.
The History of Gold ETF and Alleged Manipulation
The first gold exchange-traded product (ETP) was introduced in 1961 as a closed-end fund. It expanded its investor base in 1983. After two decades, it found its place on the U.S. Stock Exchange. The first physical gold ETF, "Gold Bullion Securities," was listed in March 2003. Since then, many have accused ETFs and financial giants of allegedly manipulating precious metal prices.
These suspicions extend to a bitcoin ETF, where unchecked paper could potentially overshadow an ETF's 100,000 BTC. Such an ETF could easily leverage fictitious supplies, aiding companies in hedging enormous derivatives bets. When prices soar abruptly, this imaginary supply might be unleashed to contain the surge. Practices like these have allegedly victimized gold.
The Impact on the Decentralized Crypto World
There is a growing concern that the decentralized world of cryptocurrency could suffer the same fate as gold and silver. Critics argue that a spot bitcoin ETF could enable entities like Blackrock to buy and control bitcoin with other people's money. They fear this could lead to unearned influence and control over the cryptocurrency market.
While bitcoin ETFs could democratize access, critics argue they could also obscure leverage and speculative practices from regulatory bodies and investors. Just like with precious metals ETFs, price discovery could be distorted.
However, not everyone agrees with this viewpoint. Some believe that the inherent decentralized nature of bitcoin will always triumph, regardless of ETFs. They argue that bitcoin is fundamentally different from gold and cannot be controlled in the long run.
The debate around the potential effects of a spot bitcoin ETF continues. Whether these criticisms are valid and whether a bitcoin ETF will lead to manipulation, as seen in precious metals markets, is yet to be seen.
Frequently Asked Questions
How do you withdraw from an IRA that holds precious metals?
You first need to decide if you want to withdraw money from an IRA account. You should also ensure that you have enough money to cover any fees and penalties associated with withdrawing funds.
An IRA is not the best option if you don't mind paying a penalty for early withdrawal. Instead, open a taxable brokerage. This option is also available if you are willing to pay taxes on the amount you withdraw.
Next, you'll need to figure out how much money you will take out of your IRA. This calculation is dependent on several factors like your age when you take the money out, how long you have had the account, and whether or not your plan to continue contributing.
Once you have an idea of the amount of your total savings you wish to convert into cash you will need to decide what type of IRA you want. Traditional IRAs permit you to withdraw your funds tax-free once you turn 59 1/2. Roth IRAs have income taxes upfront, but you can access the earnings later on without paying additional taxes.
Finally, you'll need to open a brokerage account once these calculations are completed. Brokers often offer promotional offers and signup bonuses to encourage people into opening accounts. To avoid unnecessary fees, however, try opening an account using a debit card rather than a credit card.
When you finally get around to making withdrawals from your precious metal IRA, you'll need a safe place where you can store your coins. Some storage facilities will accept bullion bars, others require you to buy individual coins. Either way, you'll need to weigh the pros and cons of each before choosing one.
Bullion bars, for example, require less space as you're not dealing with individual coins. However, you'll need to count every coin individually. However, you can easily track the value of individual coins by storing them in separate containers.
Some people prefer to keep their coins in a vault. Some prefer to keep them in a vault. Whichever method you choose, make sure you store your bullion safely so you can enjoy its benefits for years to come.
Can I buy Gold with my Self-Directed IRA?
Your self-directed IRA can be used to purchase gold, but first you need to open an account with a brokerage firm such as TD Ameritrade. You can also transfer funds from another retirement account if you already have one.
The IRS allows individuals to contribute as high as $5,500 ($6,500 if they are married and jointly) to a traditional IRA. Individuals are allowed to contribute $1,000 each ($2,000 if married or filing jointly) to a Roth IRA.
You should consider buying physical gold bullion if you decide to invest in it. Futures contracts, which are financial instruments based upon the price of gold, are financial instruments. They allow you to speculate on future prices without owning the metal itself. But, physical bullion is real bars of gold or silver that you can hold in one's hand.
How is gold taxed within an IRA?
The tax on the sale of gold is based on its fair market value when sold. When you purchase gold, you don't have to pay any taxes. It isn't considered income. If you sell it after the purchase, you will get a tax-deductible gain if you increase the price.
As collateral for loans, gold is possible. Lenders try to maximize the return on loans that you take against your assets. Selling gold is usually the best option. There's no guarantee that the lender will do this. They may just keep it. Or they might decide to resell it themselves. You lose potential profits in either case.
You should not lend against your gold if it is intended to be used as collateral. You should leave it alone if you don't intend to lend against it.
Statistics
- Instead, the economy improved, stocks rebounded, and gold plunged, losing 28 percent of its value in 2013. (aarp.org)
- (Basically, if your GDP grows by 2%, you need miners to dig 2% more gold out of the ground every year to keep prices steady.) (smartasset.com)
- You can only purchase gold bars at least 99.5% purity. (forbes.com)
- Contribution limits$6,000 (49 and under) $7,000 (50 and up)$6,000 (49 and under) $7,000 (50 and up)$58,000 or 25% of your annual compensation (whichever is smaller) (lendedu.com)
- If you take distributions before hitting 59.5, you'll owe a 10% penalty on the amount withdrawn. (lendedu.com)
External Links
finance.yahoo.com
law.cornell.edu
- 7 U.S. Code SS7 – Designation board of trade as contract marketplaces
- 26 U.S. Code SS 408 – Individual retirement account
forbes.com
- Gold IRA: Add some sparkle to your retirement nest egg
- Understanding China's Evergrande Crisis – Forbes Advisor
bbb.org
How To
The History of Gold as an Asset
From the very beginning of time, gold was a currency. It was universally accepted and loved for its beauty, durability, purity and divisibility. It was also traded internationally due to its high value. Different weights and measurements existed around the world, however, because there were not international standards to measure gold. For example, one pound sterling in England equals 24 carats; one livre tournois equals 25 carats; one mark equals 28 carats; and so on.
In the 1860s the United States began issuing American currency made up 90% copper (10% zinc) and 0.942 gold (0.942 pure). This resulted in a decline of foreign currency demand and an increase in the price. The price of gold dropped because the United States began to mint large quantities of gold coins. Because the U.S. government had too much money coming into circulation, they needed to find a way to pay off some debt. To do this, they decided that some of their excess gold would be sold back to Europe.
Many European countries began accepting gold in exchange for the dollar because they did not trust it. However, after World War I, many European countries stopped taking gold and began using paper money instead. The price of gold has risen significantly since then. Today, although the price fluctuates, gold remains one of the safest investments you can make.
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By: Jamie Redman
Title: Rising Concerns Over Bitcoin ETF: Potential Vulnerability and Parallels with Precious Metal Manipulation
Sourced From: news.bitcoin.com/amid-rising-bitcoin-etf-hopes-critics-warn-of-vulnerability-and-echoes-of-precious-metal-manipulation/
Published Date: Fri, 20 Oct 2023 18:00:50 +0000
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