What is a Bitcoin ETF? – CoinDesk

A Bitcoin Exchange Traded Fund (ETF) enables traders to invest in BTC through traditional stock markets without having to buy or sell the digital asset directly on a cryptocurrency exchange.

A Bitcoin ETF is an exchange traded fund that specifically tracks the price of the leading cryptocurrency and allows traders to buy or sell the security on an exchange throughout the day. They can be settled in cash or physically, which means investors get either fiat currency or actual bitcoins when they exit.

ETFs are regulated traditional financial products and can be purchased through a number of retail-friendly mobile trading apps including Robinhood, Trading212, TD Ameritrade, and Fidelity. The most popular track major stock indices like the Standard & Poor’s 500 Index or other traditional assets and commodities like oil and gold.

Bitcoin ETFs have been a hot topic in the crypto space for many years since the Winklevoss twins’ “COIN” bitcoin ETF, filed with the US Securities and Exchange Commission (SEC) in 2013, was rejected. It was widely believed that a Bitcoin ETF would usher in a new wave of institutional investment in the crypto industry and bring much-needed maturity and stability to the market. However, seven years later, the SEC still has to approve a Bitcoin ETF, despite dozens of proposals from multiple companies, including a second Winklevoss Twin ETF in 2018, one from Bitwise, five from Direxion, two from GraniteShares, and many more.

The SEC’s main arguments for these repeated denials were that the Bitcoin market is too volatile, not adequately monitored, and too easily manipulated.

jwplayer (“jw-video-lfsAcTFJ”) .setup ({playlist: ”https://cdn.jwplayer.com/v2/media/lfsAcTFJ”})

Things could change, however, as Canada’s financial regulator, the Ontario Securities Commission (OSC) recently approved the world’s first two Bitcoin ETFs in quick succession. The Purpose Bitcoin ETF (BTCC) and the Evolve Bitcoin ETF (EBIT) are both physically settled ETFs and have applied for listing on the Toronto Stock Exchange. TradeBlock, a subsidiary of CoinDesk, is the index provider for the Purpose ETF.

With the launch of a Bitcoin ETF in North America, many are optimistic that the SEC in the United States will follow suit soon, especially if Gary Gensler, former commissioner of the Commodity and Futures Commission (CFTC) and MIT blockchain tutor, confirms from the US Senate will replace former SEC chairman Jay Clayton.

“I suspect we’ll get an ETF this year,” said Mike Novogratz, CEO of Galaxy Digital and former Gensler colleague at Goldman Sachs in the late 1990s.

“Gary taught a course on blockchain and crypto at MIT. He understands it coldly. He’s progressive, right? And progressives, by and large, will go after … the tenants. Crypto is not a rent taker … Crypto tries to disrupt the rent taker. “

Bloomberg Senior ETF Analyst Eric Balchunas tweeted his support for the new Bitcoin ETFs, adding, “The US usually follows shortly after. Good sign for US Bitcoin ETF. “

Sui Chung, CEO of CF Benchmarks, also believes that the SEC will now come under pressure to follow suit. “Now that the OSC has said that the crypto market for this type of financial product is mature enough if a product is well engineered, the industry’s attention is inevitably turning south of the US border.”

Frequently asked questions about Bitcoin ETFs

Who can invest in ETFs and how are they traded?

You don’t have to be an accredited investor to buy ETFs. Anyone can invest in them.

To invest in ETFs, all you need to do is set up an online brokerage account or download one of the many mobile trading apps. From there, you can buy and sell a wide range of ETFs that cover a number of different markets. A list of the leading mobile trading services can be found here.

What are the pros and cons of trading ETFs?

While it may seem counter-intuitive to invest in a bitcoin ETF instead of buying real bitcoins, it has a number of advantages, namely:

  • There is no need to keep crypto safe yourself
  • Buying an ETF through an online broker is significantly safer, faster and less prone to failure than buying digital assets directly from a crypto exchange
  • There are much clearer tax implications and guidelines for traditional financial products than for digital assets
  • Exchanges are more liquid than crypto exchanges, so it’s much easier to buy and sell ETFs

However, there are a number of disadvantages to investing in a Bitcoin ETF as opposed to buying the asset directly.

  • ETFs can only be bought and sold during market trading hours, while crypto markets run 24/7. This means that if Bitcoin price moves sharply, you may have to wait hours before having an opportunity to buy up more.
  • It’s free to hold your own bitcoins, but ETFs have management fees.
  • Buying ETFs requires you to do know-your-customer (KYC) checks, but Bitcoin can be bought anonymously from peer-to-peer.
  • With ETFs, you have to trust third party custodians.

Most related links:
todayeuknews government news financial news

Source link

Comments are closed.