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Bitcoin ETFs – How Does it Work?

Let’s quickly address what Bitcoin ETF really is and its mode of operation before going deeper into its potential benefits and risks. 

Exchange-Traded Funds (ETF) can simply be described as an investment vehicle, which can be used to track the growth of an asset. Breaking it down, with ETFs, investors don’t really have to own assets, it allows them to enlarge their investments. For people that are only interested in profits and losses, ETFs also provide an easy way to buy and sell individual assets. In regards to the fact that so many ETFs do target the big names in the industry, they allow many investors to have the ability to easily enlarge and increase their holdings. 

It can simply be put that the Bitcoin ETF can mimic the price of any of the digital currency we have. This gives room for investors to purchase an ETF and they won’t have to go through all the rigorous process that comes with trading bitcoin and other associated cryptos. And also, because ETFs holders are not directly invested in bitcoin itself, they won’t have much to be worried about when it comes to the complicated storage and also the security procedures that are required of cryptocurrencies investors. 

Why Should You Bother with ETFs When it is Easier to Invest in Bitcoin? 

Since Bitcoin ETFs merely mirror the cryptocurrency’s price itself, what is the point of going through the stress of having a middle man then? Why should investors bother investing in ETFs?

There are many answers and also reasons. 

Like we said earlier in this article, investors do not have to concern themselves with the procedures that come with bitcoin investments and transactions, all they have to do is buy and sell ETFs by making use of traditional exchanges. One other important benefit that comes with investing in ETF instead of investing in Bitcoin itself, is that the ETF is like an investment vehicle, so investors can easily short sell their ETF shares if they suspect Bitcoin price might come down in the nearest future. This is what is not possible in the normal cryptocurrency market. 

To put in a summary, you can sell your ETF shares in the occurrence that you sense that the asset price might go down, this is an edge you won’t have when investing or trading in bitcoin itself. 

Another benefit of investing in Bitcoin ETFs is that they are much understood by investors, even with the fact that digital coins are becoming more popular every day and there exists many platforms like  Bitcoin Billionaire trading app that generate returns for investors by trading the fast-paced bitcoin market. As an investor, if you are going into the crypto world, it would be preferable to focus on trading on a system you understand perfectly well than starting to learn modes of  operation of something that is complicated. 

Why Bitcoin ETFs Have not Been Approved 

Companies around the world that are ready to push bitcoin ETFs into the market most times run into issues and denials with some regulatory agencies. The reason for these denials from regulatory agencies most time is the claims that bitcoin transactions are known to be traded on many unregulated exchanges, which leaves room for a lot of fraudulent transactions and manipulation. 

The SEC has since opened up bitcoin ETF applications to the masses for comments, and from the results, it is evident that the majority wants its approval. The rise of bitcoin ETFs when approved will help tremendously in fuelling gains in bitcoin. Currently, we have many Bitcoin ETF proposals that have been submitted to the US SEC for approval and they are still waiting to be approved. In his recent interview, a commissioner of the United States’ SEC believes that the Bitcoin ETF will soon be approved. In his words “In the end, someone will always meet the standards we set? I hope so, yes, I think so.”

In other continents such as Europe and Asia, we have numerous markets that have introduced cryptocurrency ETFs. And the closest thing to a bitcoin ETF that exists in the United States is the GrayScale Bitcoin Investment Trust (GBTC), this in some ways replicates some aspects of the ETF. On behalf of investors, GBTC owns bitcoins and allows them to trade in shares of the trust. 

Grayscale Investments which is its sponsor has so far purchased more than 1.5x the number of bitcoins mined since the third Bitcoin halving for its bitcoin trust, this, in turn, indicates a strong underlying demand for Bitcoin. While the world awaits the first Bitcoin ETF to hit a U.S. exchange market, the hope that cryptocurrency regulations will soon allow for the advancement of the industry is getting higher every day. The growth and adoption of Bitcoin ETFs could bring a large portion of investments into the digital asset market.



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