![]() Since 2013, the standard SEC playbook on bitcoin ETF applications was to reject them outright. ![]() Proshares (BITO): The First US Bitcoin ETF It gives you more options for risk management while still getting a look into the dynamic crypto markets. This is where an ETF model can make a huge difference – you may be able to find funds that mix bitcoin with other popular altcoins, traditional commodities, AAA stocks, and more for additional diversification. It can diversify risk: there is no denying the high volatility and risk exposure that investing in bitcoin brings to a portfolio. This is useful from a legal as well as tax efficiency perspective. ETFs trade under strict institutional oversight in mainstream market exchanges. It’s regulated: As a decentralized and often unregulated asset class, access to bitcoin is fraught with regulatory complications in many jurisdictions. Buying an ETF simplifies the whole process of investing in cryptocurrencies. There’s no need to learn the intricacies of using a wallet or dealing with a crypto exchange. ![]() It’s more convenient: For starters, you don’t have to worry about the security concerns of properly storing bitcoin. Thus, a bitcoin ETF has several benefits for investors: The main difference between buying a bitcoin ETF versus bitcoin itself is that investors are purchasing a regulated investment vehicle, instead of buying and owning a crypto asset. However, as the ETF would closely track the price of bitcoin, for the investor, it should make little difference whether they are holding a bitcoin ETF or the actual digital currency. That means that by purchasing a bitcoin ETF, an investor would be indirectly purchasing bitcoin, as they would be holding the bitcoin ETF in a portfolio, as opposed to buying and holding the digital currency itself. Invest in bitcoin directly (by owning it)Ī bitcoin ETF, such as the one proposed by the Winklevoss twins way back in 2013, would have the digital currency bitcoin as an underlying asset. Invest in bitcoin indirectly (through a fund) As a result, they allow investors – even private investors – to access asset classes and niche markets where it would otherwise be difficult to invest. That means that any investors – retail or institutional – can buy and sell holdings in an ETF to other market participants over the stock exchange.ĮTFs are usually cheaper than mutual funds since they are passive index-tracking funds. A bitcoin ETF, then, is an investment fund that tracks the price of bitcoin.ĮTFs trade on exchanges in the same way as stocks. What Is a Bitcoin ETF?Īn exchange-traded fund, commonly known as an ETF, is a type of investment fund that tracks the price of an underlying asset, such as gold, oil, an index, or a basket of stocks. After assessing the investment benefits of bitcoin ETFs, we will also try to map the path ahead from futures ETF to proper spot ETFs. In this blog post, we will take an in-depth look at bitcoin ETFs, with a quick update regarding the current crypto ETF market in the US. (In other words, you’re betting on the future price of bitcoin, not holding it directly.) Instead, proponents are taking an easier route to SEC acceptance by way of EFTs based on bitcoin futures. Granted, these are not bitcoin spot ETFs – the “holy grail” for institutional investor acceptance. After years of false starts and repeated SEC rejections, the tide is slowly turning. And when it finally arrived in October 2021, they had not one, not two, but three different funds to cheer.Īnd this is just the beginning: Business Insider estimates there are more than half a dozen new bitcoin ETFs in the pipeline. Bitcoin advocates had to wait for eight long years to get an ETF based on the cryptocurrency. ![]()
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