A Solution for Crypto ETF’s
One of the last obstacles preventing the arrival of investors in the crypto industry is the lack of reliable investment tools and international financial products that include digital assets. Overcoming this obstacle, through regulatory approvals and institutional support should catalyze the creation of more crypto-investment solutions. The invention of exchange-traded funds (ETFs) for cryptocurrencies is one such crypto-investment solution that is positioned to attract new and more risk adverse investors to crypto. ETF’s and other innovative financial instruments, once issued and approved, have the power to launch the next bullish market trend potentially.
What is an ETF?
Put simply, an ETF is marketable security that tracks an index, commodity, or basket of assets. For example, consider an ETF tracking gold. The ETF holds ownership of gold, which is worth whatever the market is willing to pay for gold at any given time. It shares of an ETF trade like a common stock on a stock exchange or in this case like any crypto asset trading on a crypto exchange. In our example, ETF shareholders do not own the gold, but instead, hold the shares in the company or fund that owns the underlying gold. Shares of the ETF experience volatility like any exchangeable asset, and also they are easily tradable due to their typical higher daily liquidity than other securities, granting increased flexibility to investors.
ETF shareholders are entitled to a proportion of the fund’s profits, paid out in dividends or as reflected in an increasing share price. ETF’s first showed up in the US in the 1990s, proliferating further in the 2000s, allowing traders to diversify their portfolios with relative simplicity and security significantly.
Why Invest in an ETF?
There are some benefits to buying cryptocurrency funds rather than buying the individual cryptocurrencies themselves. The biggest reason for many people is that it’s generally more comfortable, as, in theory, a crypto ETF could be purchased in both fiat and crypto.
For fledgling, non-technically savvy investors, the learning curve for getting involved in navigating the intricacies of crypto exchanges can be daunting. Moreover, having an expert third party manage your funds for you brings another added benefit: security. Often, the organizations that spearhead these funds manage millions (or even billions) of dollars. Finally, ETF’s offer a chance increasing portfolio diversity, protecting investors from some of the volatility and risk that comes from holding individual assets such as cryptocurrencies.
Optimizing Rules
The US Securities and Exchange Commission (SEC) is studying the possibility of adopting new rules for the registration of exchange-trade crypto funds. Once approved, these rules should streamline and simplify the process of accepting new ETFs, including those for cryptocurrencies or indexes tracking other blockchain related projects. Traditionally, the application procedure for approving a new ETF fund is a time-intensive process subject to scrutiny by the SEC. If the SEC’s proposals for a new regulatory framework for processing crypto ETF’s is adopted, waiting times will be reduced and applications simplified.
Whiles new rules would be good news for crypto. The SEC continues to dismiss ETF proposals from many different funds, such as the one from Gemini Trust. Motivating their rejections is the SEC continued concern for potential market manipulation, the lack of ability to track and deter fraudsters, and inadequate to non-existent information sharing agreements.
The SEC’s current position is subject to change, mainly as crypto adoption spread worldwide. While ETF’s remain off the books, for now, the increasing legitimacy and widespread adoption of crypto make the future of crypto ETF’s nearly inevitable. Even if the SEC delays crypto innovation in the US, it’s possible that a crypto ETF arises in another jurisdiction, such as in Europe or elsewhere.
An Opportunity for Success
Even if ETF’s remain only a vision of the future for crypto investors, there are other ways of capturing the benefits ETF’s provide. For instance, through their innovative technology platform, MultiToken offers investors the ability to create their own decentralized and self-managed exchange-tradable funds. Investors can utilize a MultiToken portfolio with a controlled balancing mechanism, offering investors the flexibility to change asset proportions for maximum benefit. For those less interested in active management, there is a semi-decentralized MultiToken option where MultiToken owners stake balancing decisions through a proprietary internal decentralized voting mechanism.
MultiToken offers everyone the exposure to the inflows of new investors from all over the world while providing investors to implement their strategies. MultiToken portfolios are accessible for any amount and from anywhere in the world through decentralized exchanges, without even needing to create an account. Investors can rest easy knowing their portfolios and personal information is secure while simulating the benefits ETF’s provide.
