What is an ETF? – Everything you need to know

What is a Bitcoin ETF?

We have been hearing more and more news about so-called Bitcoin ETFs lately. These are funds that make it possible to invest in Bitcoin without actually buying Bitcoin. The fund takes care of everything automatically for the investors in the background. This makes the buying and holding process easier for those without Bitcoin technical knowledge. Usually, an ETF often follows a basket of stocks or commodities, but in the case of Bitcoin, it is all about Bitcoin. There are basically two types of Bitcoin ETFs: Bitcoin futures ETFs and spot Bitcoin ETFs.

Bitcoin futures ETFs

A Bitcoin futures ETF is an investment object in which the fund manager buys Bitcoin futures contracts. Futures contracts make it possible to bet on the Bitcoin price. Where the owner of the contract must buy or sell the asset on a specific date and at a specific price. For example, do you not have enough cash to buy Bitcoin, but do you expect the price to rise significantly? Then you can buy futures contracts with which, for example, you can buy one Bitcoin in 12 months for $ 50,000. With a Bitcoin futures ETF, you buy a stake in a fund that buys those futures contracts. For this reason, among other things, a Bitcoin futures ETF is often a bit more expensive and the price does not trade quite in line with the spot market. This is why many Bitcoiners see a spot Bitcoin ETF as the holy grail in this market.

Find Bitcoin ETFs

A spot Bitcoin ETF is an investment object where the fund manager actually physically buys Bitcoin to back up the value of the fund. Here you only pay the administration costs and other costs that an administrator has. A spot Bitcoin ETF exactly follows the price of Bitcoin and is therefore an easy way to invest in Bitcoin.

Existing Bitcoin ETFs

At the time of writing, there are already several Bitcoin ETFs of both types on the market worldwide. The most famous is the Canadian Purpose Bitcoin ETF, a spot Bitcoin ETF that already has more than 31,149 Bitcoin under management for their clients. In addition to Canada, spot Bitcoin ETFs are also available in Singapore, Brazil and Australia. In America, there are currently four Bitcoin futures ETFs on the market, but a spot Bitcoin ETF is still waiting.

The long battle for a spot Bitcoin ETF in America

America is the promised land when it comes to the financial market. The entire Bitcoin industry has been looking forward to the approval of a US spot Bitcoin ETF for years. So far, however, the US regulator, the Securities and Exchange Commission (SEC), has rejected all applications. Now that several countries have already approved a spot Bitcoin ETF, the pressure on the SEC to approve a US spot Bitcoin ETF is also increasing. It therefore seems only a matter of time before the world’s most important financial regulator moves on.

The approval of a US spot Bitcoin ETF is primarily important for Bitcoin because it provides security. The chance that America will still ban Bitcoin after the approval of a spot Bitcoin ETF is small. For many investors, it would remove the last bit of uncertainty and be what it takes to win them over. In Canada, the Purpose Bitcoin ETF has repurchased 31,149 Bitcoin after just over a year, but the US ETF market is about 20 times larger than the Canadian one. Which would mean that the approval of a US spot Bitcoin ETF is likely to see a tidal wave of capital heading towards Bitcoin. For that reason, many Bitcoiners are eagerly awaiting the approval of a US spot bitcoin ETF.

The pressure on the SEC is currently so high that, among other things, asset manager Grayscale has announced that it will take the regulator to court due to a new refusal. It’s still unknown if they will live up to those words, but it indicates that the industry is slowly getting rid of the SEC’s excuses for not allowing a fake Bitcoin ETF in America.

ETFs with Bitcoin Miners and Bitcoin Companies

There are also ETFs that allow you to invest in stocks of Bitcoin miners and other Bitcoin-related companies. For example, the world’s largest asset manager, BlackRock, recently launched the iShares Blockchain and Tech ETF. Within this ETF, Coinbase fills 10 percent of the portfolio, but miners like Marathon Digital and Riot Blockchain also make up about 10 percent. This is a Bitcoin ETF that you do not invest directly in Bitcoin with, but more in the industry that surrounds Bitcoin. In theory, these companies can do better than Bitcoin itself, but that, of course, is not a guarantee. Like any investment, by the way, because if there is no risk associated with an investment, then there would be no money to be made.

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