TL:DR
Blockchain technology is coming into the spotlight and Bitcoin is solidifying itself as a legitimate investment asset that anyone can invest in. However, not everyone can, as some institutions and individuals can only participate in a highly regulated manner. Many believe Bitcoin ETFs hold the key to this kind of accessibility.
Exchange-traded funds, or ETFs, are investment products that present passive exposure to the performance of an underlying index, asset class, margin instrument, or other investment. ETFs are a popular way to invest in commodities such as gold and silver, as well as stocks and bonds. One of the most exciting areas for ETFs at this point in time is cryptocurrencies such as Bitcoin.
Introduction
Since its origin, Bitcoin has come a long way in terms of its price. In the earliest days, 10,000 BTC were used to buy pizza. Fast forward 10 years later, 10,000 BTC would make you one of the wealthiest individuals on the planet.
In fact, Bitcoin has paved the way for countless crypto projects to emerge, industries like Defi to be built, and allowed for financial innovation to take place. Since its release, the crypto industry has become more sophisticated with institutional investors coming on board.
Microstrategy, an investment firm is well known for converting its balance sheet into billions of dollars worth of Bitcoin. Other popular institutional investors range from popular car manufacturers Tesla, to centralized exchanges like Coinbase.
When it comes to Bitcoin, the debate is often focused on the price and its potential future. Is it a bubble? Is it a fraud? Will it be used in everyday life? These questions are all valid ones to ask coupled with high-profile comments from Wall Street and others that are very negative. But what building blocks are still missing before Bitcoin can become a major asset in the global macroeconomic environment? One of these could be a regulated way for institutions and more traditional players to get exposure to it. According to some, the best way to do that could be through an ETF, which would bring many other investors into the space as well.
What is a Bitcoin ETF?
A bitcoin ETF is a type of exchange-traded fund (ETF) whose value is tied to the price of Bitcoin. It would provide investors with a reliable, easy way to trade in and out of Bitcoin without having to purchase the cryptocurrency directly or go through an official Bitcoin exchange.
An exchange-traded fund that allows people to invest in the price of Bitcoin without actually buying Bitcoins would be a game-changer.
As cryptocurrencies and blockchain technology are still in their very early stages, a lot of different entities are trying to provide solutions to move the entire industry forward. For example, many firms have been launching ETFs, or exchange-traded funds, which are regulated financial products that trade on traditional markets such as the NASDAQ or NYSE. This allows institutional players to participate in the digital asset market without actually having to own a cryptocurrency.
Why Is a Bitcoin ETF Important?
It turns out that Bitcoin isn’t the easiest asset to deal with. It requires complex regulatory frameworks, specifically built financial plumbing, and a custody solution for large institutional investors. These large institutions like Morgan Stanley, won’t simply YOLO billions of dollars into a coin and plug a hardware wallet into a laptop.
Further, one important thing to note is that institutional investors also allow for stability and larger access to investment funds. This is why institutional investors are important in any market. ETFs allow institutional investors access to a faster and better way to invest in a crypto asset like Bitcoin without focusing on all the nitty-gritty that comes with owning a Bitcoin.
ETFs are also able to hold other assets such as Ethereum, Tesla stock, or even gold. This could be for those investors who would like to diversify their investments.
Bitcoin ETF Market
Although Bitcoin ETFs exist in the U.S, other markets such as Canada have allowed for the trading of Bitcoin. The exchange where you can trade it in Cananda is called the Purpose BTC ETF. You can purchase this on the Toronto Stock Exchange with Ticker symbol BTCC.
Further, as stated above, Bitcoin ETF exists in the US market and it is currently traded in the NYSE. It is important to note that much of the financial plumbing necessary to attract large institutional investors has been built in the recent past. Companies like Microstrategy and Tesla would have a difficult time buying Bitcoin if it were not for the current system in in place.
Bitcoin ETFs continue to mature the market and allow for more players to join the game.
Should You Invest In A Bitcoin ETF?
Bitcoin ETFs are a great way to diversify your portfolio while having skin in the crypto game. If you are someone who doesn’t want to bother with all the nitty gritty with owning Bitcoin then this could be an option.
Buying Bitcoin directly could have many benefits especially if you are one of those individuals looking to hedge your savings from inflation caused by the current fiat system. There are many benefits to owning Bitcoin which includes earning yields to using it as collateral for loans.
Nonetheless, investing in a Bitcoin ETF comes down to the investor and what they are looking for. Both methods will provide you with the price exposure that comes with having Bitcoin in your portfolio. ETFs, however, will eliminate the nitty-gritty of holding custody of a bitcoin.
Final Thoughts
Bitcoin ETFs let traditional investors get exposure to digital assets in a regulated way. Since more institutions are looking for ways to add digital assets to their portfolios, an ETF is increasingly becoming an appealing option. It’s definitely an exciting time for Bitcoin!
Comments