What Are Bitcoin ETFs?
Have you heard about Bitcoin? Well, that was a rhetorical question; who hasn’t, right? Many synonym Cryptocurrency with Bitcoin like that’s the only digital currency. However, there are over 5000 Cryptocurrencies in the market including Bitcoin — the first-ever Cryptocurrency followed by Ethereum, Litecoin, Cardano, Dogecoin, and so forth. Therefore, every Bitcoin is a Cryptocurrency, but not every Cryptocurrency is Bitcoin.
In 2009, Satoshi Nakamoto introduced Bitcoin as an alternate payment method based on Blockchain Technology, a decentralized peer-to-peer network. Bitcoin is known for its store of value, and it is also solidifying itself when it comes to investment. A decade ago, Bitcoin trading started at $0.0008 to $0.08 per coin in July 2010, and recently in April 2021, it reached its all-time high at $64,000 approximately. So it is pretty evident that apart from being used as a digital currency for transactions, it is also a profitable Investment approach.
We have established everything we need to know about Bitcoin, so fast forward, lately Bitcoin ETFs have been making the news. ETFs stands for Exchange Traded Fund, it is a type of investment fund and exchange-traded product. ETFs refer to a basket of securities that tracks an underlying asset or index; similarly, we have the very process based on Bitcoin. ETFs are used across various industries, commodities, and asset classes.
So what are Bitcoin ETFs? What are its functions and applications? What do they offer? And most importantly, do they really exist?
In this blog, we are going to discuss What are Bitcoin ETFs:
Bitcoin ETFs are exchange-traded funds that track Bitcoin’s value and trades on traditional market exchanges such as TSX, NASDAQ, or NYSE, rather than trading on Cryptocurrency exchanges. Basically, the concept enables investors to invest in Bitcoin without going through the Crypto exchange hassle.
How Do Bitcoin ETFs Work?
Bitcoin ETFs is an investment vehicle that works like the traditional ETFs wherein it tracks the underlying asset or the index; here, it tracks Bitcoin. It tracks the performance of the assets or the group of assets; consequently, Bitcoin ETFs enables investors to hold baskets of assets such as Bitcoin, Ethereum, Cardano, Tesla stock, gold, etc. Additionally, when the value of Bitcoin increases, the price of an ETF also increases and vice versa.
Bitcoin ETFs allows investors to diversify their portfolios without actually owning the asset themselves.
Bitcoin ETFs — Advantages
- Investment in Bitcoin ETFs provides leverage to Bitcoin’s price without learning about Bitcoin or going through the complicated process.
- You will not have to sign up or deal with the Cryptocurrency Exchange, considering you can directly trade through traditional exchanges.
- Through Bitcoin ETFs, you also avoid the direct risks associated with owning Bitcoin.
- It is faster, secure, and prone to fewer outages than Bitcoin purchasing from Cryptocurrency exchanges.
- Cryptocurrencies are unregulated, so many countries do not allow Bitcoin trading. In comparison, Bitcoin ETFs trading are carried on traditional exchanges and are likely to be regulated by the SEC, offering eligibility for tax efficiency in return.
- Bitcoin ETFs also eliminate the complex storage system.
- With Bitcoin ETFs, you will not have to go through the security procedures otherwise associated with Cryptocurrencies.