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Bitcoin ETF will Increase Demand and Price of BTC, Interview with Finance Researcher Stephen McKeon

Bitcoin ETF will Increase Demand and Price of BTC, Interview with Finance Researcher Stephen McKeon
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This post was last updated on November 7th, 2019 at 02:53 am

CryptoSlate conducted an interview with Stephen McKeon, chief strategy advisor to Security Token Academy and associate professor at the University of Oregon. McKeon anticipates that a Bitcoin ETF will give institutional investors greater access to the asset, increasing the demand and price of BTC. He also elaborated on topics ranging from asset tokenization, crypto’s role in the global economy, and the criteria for mainstream adoption.

Background on Stephen McKeon

In addition to his work at Security Token Academy, Stephen McKeon serves as an advisor to Harbor, a security token issuance platform. Outside the cryptocurrency industry, he works as a partner at Collaborative Funds—a venture capital firm—and is an associate professor of finance at the University of Oregon.

Several research papers by McKeon have been published in top journals like the Review of Financial Studies, Journal of Financial Economics, and the Journal of Financial and Quantitative Analysis. The professor has also enjoyed press coverage from the Wall Street Journal, CNBC, Financial Times, VentureBeat, Bloomberg Businessweek, NY Times (Dealbook), Forbes, and MarketWatch.

McKeon co-founded the real-estate firm known as Skyworks Development Group in 2017.

How an ETF Approval Will Impact the Cryptocurrency Industry

While some members of the cryptocurrency community anticipate that the approval of a Bitcoin ETF (exchange-traded fund) will have a positive effect on the bitcoin price, others do not see the point of having one. According to McKeon:

“Approval of an ETF will make Bitcoin exposure more easily attainable to a larger pool of Investors. If there is latent demand that is being suppressed due to accessibility, then the ETF would increase buy side pressure and have a positive influence on price.”

McKeon anticipates that the approval of Bitcoin ETFs will attract a group of investors that currently have difficulties investing in Bitcoin in a way that complies with regulations.

As a result, institutions are the main group of investors expected to patronize Bitcoin ETFs.  According to McKeon, the entry of such investors into the bitcoin market will lead to an increase in both demand and price.

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However, it is worth noting that the launch of Bitcoin futures by CBOE Global Markets and CME Group in December 2017 neither increased demand nor affected price positively.

As is the case with the ETFs, many in the crypto community expected the entry of institutional investors and thus a price increase to follow the launch of the two futures products. In fact, demand for bitcoin futures from CBOE was so low that the exchange delisted them.

How Crypto Tokenized Assets Will Contribute to the World Economy

Stephen McKeon emphasized Security Token Academy’s believes in tokenized assets as the best means of “documenting and transferring ownership claims.” A quintessential example is the tokenization of real estate assets. While tokenized real estate assets can be transferred within seconds, traditional real estate transactions can take months to close.

The chief strategy advisor added that improvements in user interfaces and reporting tools will eventually lead to a reduction in issuance, trading, and capital costs. For instance, improvements in reporting tools will further reduce the need for professionals to handle various tasks involved with the issuance of security tokens.

According to McKeon, this technological progress, coupled with reductions in costs will lead to an increase in capital formation globally.

Will Crypto Dominate the Future Economy

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When asked on what the predominant currency of the future will be, McKeon said fiat currencies will continue to be the more prevalent currency in the near term. He added that the use of fiat-pegged digital assets (stablecoins) will continue to be on the rise.

In McKeon’s opinion, fiat-pegged assets are necessary to onboard new users to the cryptocurrency economy with less exposure to currency risks. In the future, he hopes the industry will shift from fiat pegs. As the cryptocurrency industry grows, sees more adoption, and experiences more stability, there will be less need for stablecoins.

Blockchain in Lecture Halls

CryptoSlate covered the growing interest of university students in blockchain courses in August of 2018. Students are keen on taking blockchain courses because it improves their career prospects, with “blockchain developer” listed as a top “emerging job” emphasizing the opportunities in the sector.

We inquired McKeon about the kind of blockchain courses being offered in universities. He named the computer science, finance, and law departments as the main departments involved with blockchain courses. The professor added that the most comprehensive programs cover elements from all three areas of study.

Achieving Mainstream Crypto Adoption

According to McKeon on mass adoption:

“Only a minority of users will adopt on principle. For mass adoption, it has to enable features and functionality that are both in demand, and hard to deliver via other means.”

McKeon believes crypto technology has to outcompete other information structures before mass adoption can be achieved. This will require improvements in user interfaces and private key management solutions, making crypto friendlier for non-tech-savvy users. Entering and exiting the crypto market with fiat should also become a seamless process for users, said McKeon.

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Finally, McKeon believes regulatory clarity is a necessity for mass adoption. Regulators must clearly define the different categories of crypto assets and provide guidelines on these assets.

If regulatory bodies, like the Securities Exchange Commission (SEC), do offer clarity, investors and businesses which were previously reluctant to enter the industry because of regulatory uncertainty could then participate.

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