Bitcoin ETF is one of the hottest keywords recently. Latest as of October 15 - US Securities and Exchange Commission (SEC) accepted Bitcoin ETF of ProShares and will be traded on Arca of the New York Stock Exchange on October 18, 2021.
So do you know? Bitcoin ETF what is it? About both its definition and meaning?
Bitcoin and the market cryptocurrency has come a long way. Less than a decade ago, the technology was used by only a small community of tech enthusiasts, and the price Bitcoin is also equivalent to 10,000 BTC for two pizzas.
But the last few years, we have seen many successful businesses built on the industry cryptocurrency. In which, countless new projects have appeared and the market marked a special milestone with the introduction of decentralized finance.
Institutional recognition of cryptocurrencies is also widespread. MicroStrategy converted more than $3 billion of their balance sheet into Bitcoin, and you can also buy the Tesla…latest by BTC that I own.
But what pieces are still missing to Bitcoin could become a major asset in the global macroeconomic environment? One of these ways is by making it easy for institutions and traditional investors to access it. For many professionals, the best way to do that is through a fund ETF.
What is a Bitcoin ETF?
First, let's look at the overview. ETF, stands for Exchange-traded Funds, roughly translated as exchange-traded funds - is a security that tracks the price of an asset but can be bought or sold on a stock exchange just like a regular stock. For example, gold ETFs have been around for decades and these funds track the price of gold.
A Bitcoin ETF will function in a similar way – a security at the price of Bitcoin.
ETFs are state-regulated financial products. As such, they are traded on traditional markets like the NASDAQ or NYSE exchanges and not on a cryptocurrency exchange. However, this could change in the future as the border between traditional finance and the crypto industry continues to blur.
Why is an ETF needed for Bitcoin?
In fact, Bitcoin is not the easiest asset to trade. For example, custody can pose some complex problems for a large organization. Anyway, Goldman Sachs won't be able to just plug a hardware wallet into a laptop and comfortably transfer 2 billion Bitcoins into it. Large financial institutions do not operate in the same way as individual investors, and they need a complex regulatory framework, not to mention a financial system, to be able to enter the sector.
This is why ETFs have to go a long way to being accepted and widening their base for potential investors. It can give traditional market traders financial exposure to Bitcoin and they don't have to worry about other difficulties of owning the coin. Bitcoin ETFs can also hold assets other than Bitcoin. For example, a Bitcoin ETF might contain a basket of assets, like Bitcoin, Ethereum, shares Tesla, gold, etc. This can diversify benefits for investors.
Bitcoin ETF Brief Overview
In general, when people talk about Bitcoin ETFs, they are usually talking about ETFs in the US market. However, equity ETFs exist in many different markets. For example, the first Bitcoin ETF was launched on the Canadian stock exchange. The fund's name is the Purpose Bitcoin ETF and it trades on the Toronto Stock Exchange, under the ticker BTCC.
Even so, most eyes are on US regulators, as it is the largest financial market in the world. Having US Bitcoin ETFs could help strengthen Bitcoin's recognition as an investment asset.
In fact, there have been several attempts to launch a Bitcoin ETF in the United States. Follow announcement the latest, the approval of 4 Bitcoin ETFs – Global X Bitcoin Trust, Valkyrie XBTO Bitcoin Futures Fund, WisdomTree Bitcoin Trust and Kryptoin Bitcoin ETF have been pushed back to December 2021.
Why does this committee continue to reject, or renew, ETF applications? They often criticize the volatility, unregulated nature of the Bitcoin market, and their apparent responsibility for market manipulation. All of this is the cause SEC reject ETF applications. While this may be true to some extent, it has also been true of many financial markets that have other ETFs.
In addition, much of the financial system necessary for Bitcoin to become a legitimate macro-asset was built into the eventual bear market. Just a few years ago, if MicroStrategy wanted to buy billions of Bitcoins, this would have been extremely difficult to do. However, now both the infrastructure and the liquidity of bitcoin are prepared and ready for such large investments.
This continued maturation of the Bitcoin market will likely alter regulatory bodies and eventually pave the way for a Bitcoin ETF to come into existence in the United States.
Should You Invest in a Bitcoin ETF?
Is a Bitcoin ETF the Right Financial Instrument for You to Invest in Bitcoin? If you are an individual investor who wants to protect your savings against the possibility of fiat currency inflation, you can choose to buy Bitcoin. After all, Bitcoin brought about the democratization of finance.
In fact, for each person, Bitcoin can bring many different values. But having direct control of your savings is a powerful thing. Not to mention there are plenty of ways for you to profit through yield mining or lending in Bitcoin.
With that said, there are advantages to investing in a Bitcoin ETF. So, if you are interested in investing in Bitcoin, then an ETF could be a good choice as well.
Bitcoin ETFs practically give investors in the traditional market the opportunity to approach Bitcoin more closely. This is also a best way to bring recognition to cryptocurrency, asserting it as an asset class.