The Capital
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The Capital

Bitcoin ETFs: Pros, Cons, and Alternatives for Investors

By Coinmatics on The Capital

Bitcoin ETF (exchange-traded fund) is a way to invest in crypto with the help of the instruments of the traditional markets.

How does it work?

It is quite simple. An exchange fund purchases an asset, which, in this case, is Bitcoin, and then sells the stocks that can be traded on traditional stock markets.

The model of cryptocurrency management has the following peculiarities:

  • It encourages the adoption of cryptocurrencies as full-scale investment methods. Investors don’t have to figure out all the features of the relatively new industry, learn the ropes of the technological platform, and worry about the risks connected with the underdeveloped systems of cryptocurrency regulation and supervision.
  • An ETF, as a security type, offers steady liquidity, which affects Bitcoin positively.
  • A Bitcoin ETF is a more developed instrument in terms of regulation and control, which makes it more attractive for institutional investors avoiding to enter crypto markets directly. It follows that ETFs enable the creation of cryptocurrency investment and pension funds.
  • It removes a range of technical issues such as the storage of coins, registration of wallets, compliance with the safety rules, the threat of hacking attacks, etc. The risks are shouldered by founders of ETFs, while investors accept the rules fostering transparency, which straighten the credibility of the industry and increase the liquidity of the type of assets.

The abovementioned advantages make ETFs attractive for those investors who are familiar with the stock assets but are not into cryptocurrencies and don’t want to figure out the features of crypto. An ETF can be seen as an instrument for the adaptation of a cryptocurrency to operations within the framework of the financial structure.

However, the use of ETFs has a downside — a cryptocurrency loses its main advantage, namely the independence from the financial regulators. Thus, it becomes as controlled as any traditional asset supervised by governments. The involvement of institutional investors can serve not only as a push forward but also as a source of manipulations, which also contradicts the current advantages of the industry.

In other words, the implementation of Bitcoin ETFs conflicts with the idea behind cryptocurrencies — an idea of an alternative financial platform, which is hoped for by cryptocurrency traders all around the globe. The interfere of ETFs is a serious issue, the advantages of which are far from outweighing the possible disadvantages for everyone.

One important shortcoming of ETFs is an inevitable reduction of the volatility of a cryptocurrency. It is especially important since it is the volatility that makes the market so attractive to traders and investors. It is inevitable if the stabilization of crypto assets is achieved via the regulation.

Along with this, the question remains whether the barrier to entry the market shall be decreased or not. The technological features, risks, and a lack of regulation of the field do discourage many potential investors.

The global shift towards ETFs, at least for now, looks too radical and controversial, which draws the attention to other options such, for instance, as technological platforms facilitating the investment in cryptocurrency assets with no need of learning the ropes.

In this regard, the copy trading platforms providing users with the ability to subscribe to successful traders for copying their trades look like a good choice. The verifying statistics reduce the risks down to the minimum — investors choose those traders who have already proved to be successful professionals. The high volatility of the market makes such kind of investments especially profitable.

The Coinmatics company provides one such platform for investments. To use it, one must register on the website, go to Copy trading → Signal Providers, and choose a trader from the top of the ranking.

After this, one of two modes of fallowing shall be picked — manual or automatic. The former implies that you will receive signals on your Telegram account and do the corresponding actions manually; the latter implies that all the deals will be operated by the system automatically due to which you will not miss anything out, and your average daily stats will be on a level with the those of the best cryptocurrency traders.

To learn more about Coinmatics, please read the About Us file (PDF).

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