What is Bitcoin ETF?

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The ETF is an Exchange Trading Fund. Bitcoin ETF is a better way to trade and invest in the crypto world. ETF proponents describe them as vehicles for pushing the acceptance of Bitcoin and a simple way to expose investors to the full potential of cryptos.

For cryptocurrency enthusiasts and investors looking to capitalize on the growing popularity of exchange-traded funds (ETFs), the possibility of an ETF that tracks bitcoin is the best opportunity for such type of connection. However, several problems are occurring when trying to launch the first bitcoin ETFs. The reason is that the bitcoin, largest cryptocurrency in the world by market cap, is still in its early stage. The price of bitcoin could be easily manipulated by bitcoin holders who hold large shares. Additionally, the U.S. Securities and Exchange Commission (SEC) is doubtful to allow an ETF focused on the new and largely untested cryptocurrency market to make its way to the public.

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WORKING MECHANISM OF BITCOIN ETF :

An ETF is an investment device that tracks the performance of a particular asset or group of assets. ETFs allow investors to diversify their investments without actually owning the assets tracked by an ETF. ETF provides flexibility to buying and selling assets for those individuals focusing only on profit and loss.

A bitcoin ETF imitates the price of the most popular digital currency in the world. This new ETF offers the investors with the flexibility of buying into ETF without getting into the complicated process of trading bitcoin itself. Moreover, since the holders of ETF might not be directly invested in bitcoin, they need not worry about the complex storage and security procedures.

ADVANTAGES OF BITCOIN ETFs :

Investors can use the ETFs as an opportunity to use bitcoin as an asset class, which will be publicly traded for the first time. It offers some significant advantages :

  1. Bitcoin and other cryptocurrencies would receive much-needed exposure and validation from the global financial markets: Bitcoin ETFs are seen as an easy way to raise awareness about the growth of blockchain technology, without compelling the investors to get involved with the complex blockchain-based projects.
  2. Since the ETFs are traded on exchanges as stocks for a long time now, they have already gained substantial popularity among both institutional and retail investors: ETFs are well-established and are often seen as offering stable liquidity and are easy to buy, sell or short sell.
  3. Better regulated status of Bitcoin ETFs might help with legalizing the status of the Bitcoin as an asset: Combined with potential tax advantages, less space for market manipulations, and less volatile trading, the ETFs are seen as potential stabilizers of the Bitcoin as a project.
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REFERENCES :

  1. https://cryptonews.com/guides/a-beginner-s-guide-to-bitcoin-etfs.htm
  2. https://medium.com/flowchain-knowledgecamp/are-bitcoin-etfs-matters-c9c3accced1e
  3. https://medium.com/flowchain-knowledgecamp/are-bitcoin-etfs-matters-c9c3accced1e
  4. https://www.coindesk.com/the-case-for-a-bitcoin-etf
  5. Image source: https://www.google.com/url?sa=i&url=https%3A%2F%2Fwww.cryptopolitan.com%2Fexpect-sec-approved-bitcoin-etf-soon%2F&psig=AOvVaw310MAbmJG3u0KMnis25FvL&ust=1581785569734000&source=images&cd=vfe&ved=0CAIQjRxqFwoTCPjj08_A0ecCFQAAAAAdAAAAABAD

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