What is a Bitcoin ETF?
Bitcoin ETF allows investors to invest in Bitcoin without creating a crypto wallet. Without a wallet, you cannot own any cryptocurrencies.
Bitcoin exchange-traded funds (ETFs) are an investment fund which tracks the value of Bitcoin and trades on traditional exchanges rather than cryptocurrency exchanges.
ETFs provide investors with more secure, reliable diversification across different cryptocurrencies and the different companies involved in the underlying blockchain technology.
To buy ETFs, investors don't need to hold crypto wallets, keys, storage, exchanges, etc, as everything is done by the Bitcoin ETF company.
Ever since the cryptocurrency market started rising with thousands of different cryptocurrencies trying to attract the attention of users, investors have been confused about its investment, as crypto projects command very high risk due to huge volatility. However, there are some tokens that have always been very popular among investors, such as Bitcoin, Ethereum, Litecoin, Tether, etc.
Cryptocurrency is based on blockchain technology, a peer-to-peer network of participants establishing a decentralized ledger. It is just digital money that takes the form of coins/tokens on that ledger. Decentralization is a central driving theme of cryptocurrencies, as cryptocurrency does not rely on physical banks and government control.
An investor who wants to own crypto without crypto exchange just needs to find an ETF fund that invests in cryptocurrencies to own it.
Today, ETFs are available for several assets and industries, ranging from commodities to currencies.
As ETFs have various stocks in their kitty, the investors won't lose big if one of the stocks crash. All Bitcoin ETFs would do is mimic the crypto's price without having to physically buy any.
Because ETF holders won't be directly invested in Bitcoin itself, they won't need to worry about the complex storage and security procedures.
All the ETF fund assets are held in 100% cold storage with a regulated, insured custodian, and are audited annually.
Advantages of Bitcoin ETFs
A Bitcoin ETF simplifies the process of investing in Bitcoin. It is convenient for any investor, as he/she doesn't need to track the price of Bitcoin everyday or sign up for a cryptocurrency exchange to own it. Everything from tracking, buying and selling is done by ETFs.
An ETF can hold more than just one asset. Let me explain to you this. A Bitcoin ETF could comprise Bitcoin, Tesla stocks, Google stocks, Apple stocks, Facebook stocks, and more, providing investors with the opportunity to mitigate risk and diversify their portfolios. By trading on a regulated market exchange, a Bitcoin ETF would provide investors with the chance to diversify their existing equity portfolios.
As the cryptocurrency market is currency unregulated and decentralized, the majority of the countries don't allow purchases of crypto. However, if an investor uses the ETF route, he is eligible for tax efficiency, as trading is done on traditional exchanges which are regulated security exchanges boards.
Even though a handful of Bitcoin ETFs are now across the globe, this is a positive sign, as more and more ETFs can be possible for other tokens too, apart from Bitcoin.
Bitcoin ETFs is a smart idea when it comes to investing in crypto assets!
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