Understanding Bitcoin ETFs and their features – European Gaming Industry News
Since its inception in 2007, Bitcoin and the entire digital currency market have come a long way. About 10 years back, crypto technology was only used by a small number of people; The value of Bitcoin was practically non-existent, with 10,000 Bitcoins being exchanged for $50 worth of pizzas.
Today, many businesses have been established because of cryptocurrency. On digital currency exchanges you can buy litecoin. DeFi integrates the world of conventional finance with crypto, and NFTs serve as a worthy disruption to the art market.
Furthermore, traditional financial institutions are beginning to better embrace cryptocurrency. Fortune 500 company, Tesla, owns a large amount of Bitcoin, and asset management companies are starting to diversify into cryptocurrency.
Yet some still say that Bitcoin and other cryptocurrencies are not still major players in finance. One of the things that the wider financial community is waiting for is the establishment of Bitcoin ETFs.
What are Bitcoin ETFs?
The term “ETF” stands for Exchange-Traded Fund, and it exists in the conventional financial market. An ETF tracks the value of a financial instrument such as gold, stocks or even an entire market. If a Bitcoin ETF were established, it would also track the price of Bitcoin.
ETFs are used by investors who do not want to hold the asset on crypto exchanges for a variety of reasons, but still intend to benefit from the price movement of the asset. The fact is that as a retail business, the way you do business is different than for institutions.
If a Bitcoin ETF can be established, there will be mass adoption from the traditional financial space. A Bitcoin ETF can also track the price of other cryptoassets such as Ethereum to diversify risk.
Why Bitcoin ETFs Are Crucial to the Crypto Market
Financial security such as Bitcoin is not practical for some classes of investors to own. A large organization with millions of daily transactions will find it difficult to manage digital currency. For example, a firm like JP Morgan Chase can’t just buy a hardware wallet to start making transactions with it.
You must realize that large financial firms do not trade in the same way as individual traders do. To begin delving into the cryptocurrency space, major financial firms must go through a higher level of regulation.
A Bitcoin ETF is similar to meeting these large firms in their comfort zones. Once a Bitcoin ETF is created, there will be interest from hedge funds and other top financial institutions. In this way, they can experience the benefits of engaging in the cryptocurrency market without owning any digital currencies.
Bitcoin ETFs need not be limited to holding Bitcoins alone. Theoretically, a Bitcoin ETF can invest in various cryptocurrencies such as Ethereum, Litecoin and even instruments in the stock and commodity markets. This style of spreading your assets across a range of financial assets gives investors the benefits associated with asset diversification.
The Future of Bitcoin ETFs
Usually, when people refer to Bitcoin ETFs, they focus on the US market. After all, the US sets the trends for many other markets to follow as it is the largest market.
There are already Bitcoin ETFs in other countries such as Canada. The SEC has already accepted the application for a Bitcoin ETF to be listed on the New York Stock Exchange (NYSE). Investors are waiting to see if other Bitcoin ETF applications are accepted to drive the overall cryptocurrency market cap.
Suppose you are attracted to invest in a Bitcoin ETF rather than in Bitcoin. If so, it must be noted that both come with their associated benefits. If you intend to participate in the financial markets to remove inflationary pressure from your fiat currency, it would be best to simply buy Bitcoin.
Some investors prefer to keep their bitcoin in a wallet to spend as they wish. There are also different ways you can invest your crypto, such as yield farming.
Conclusion
Bitcoin ETFs have been the center of discussion for financial market participants. Several traders believe that the creation of Bitcoin ETFs will bring institutional money into the sector.
Bitcoin ETFs may also decide to track other financial assets besides Bitcoin. Although a few Bitcoin ETF applications have been accepted, investors are looking for increased creations of Bitcoin ETFs.
