Bitcoin ETFs are the latest trend in the world of digital assets, and their rapid rise in the market could mark a new era of crypto. These exchange-traded funds come at the perfect time for investors to reduce their risks and increase their funds, as they are less expensive and offer many tax benefits.
ETFs represent a large portion of assets whose shares are traded on stock exchanges. This is why they appear to have similar characteristics and benefits to stocks or bonds. Bitcoin ETFs also have more benefits for investors as they guarantee convenience and better prices since they are not traded on crypto exchanges but are similar to these assets. At the same time, they simulate the performance of a crypto by improving its future.
Investing in Bitcoin ETFs also allows users to buy or sell the coin at a specific price and time, an aspect regulated in the contract concluded beforehand. Overall, they are great for portfolio diversification, and although it took a while for the bubble to burst, the first Bitcoin spot ETF recently reached Europe.
How did the first Bitcoin ETF arrive in Europe?
The first Spot Bitcoin ETF was supposed to be delivered in 2022, but it was delayed due to SEC regulations and limits on the crypto market. The ETF is now regulated by the Guernsey Financial Services Commission (GFSC).
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Although ETFs entered the European ecosystem later, the most impressive thing is that all this happened before the United States made a decision regarding ETFs. The SEC continues to delay the decision to approve their listing. A recent article indicated that the case would not be resolved until early 2024, leaving U.S. investors waiting to enjoy the same benefits as the rest of the world. The regulator is expected to maintain its stance against cryptocurrencies, with leaders viewing the tool as dangerous for the economy.
Why is the US so obsessed with ETFs when they are so beneficial to investors?
Large companies have submitted their applications for proposals to transform certain assets and products into ETFs. However, the SEC has repeatedly rejected or ignored them. Despite numerous requests, the regulator insists that these assets could be subject to fraud and market manipulation due to its low level of trading oversight.
There is also another reason why it takes so long to review applications. The SEC quietly vets organizations and their proposals for approximately 240 days. Since the regulator also has the option to extend its deadlines, it may not meet the public deadline. This is why it is better to expect a decision to be made later than announced.
Bitcoin spot ETF vs trusts: which is better?
ETFs and trusts appear to have similar characteristics, especially since they do not require investors to provide ownership of Bitcoin. However, they have different structures. Bitcoin trusts have attracted no attention from the SEC or other regulatory watchdogs, making them more accessible, despite being closed-end funds. However, their prices may deviate significantly from the representative asset and cannot be exchanged for Bitcoin. The supply of trust shares is also limited and cannot be changed based on demand.
On the other hand, ETFs are open-ended funds whose shares can change based on demand. Their prices are closely linked to those of Bitcoin, so they are adjacent to the underlying asset. ETFs also allow for the redemption of shares, providing investors with a significant advantage in meeting demand requirements. ETFs are also regulated investment products, ensuring a higher level of security for customers than trust funds, but they still have a long way to go before they are fully authorized.
Is it so great to invest in Bitcoin ETFs?
Although they have yet to be officially approved by the SEC, BTC ETFs can be purchased through a specific exchange that allows users to invest without purchasing Bitcoin. A brokerage account is required since ETFs are acquired through online brokers. Users can also use market or limit orders to purchase their ETFs, depending on the highest prices they are willing to offer.
There are many benefits to choosing BTC ETFs for portfolio diversification, as they provide perfect exposure to the Bitcoin price without facing the risks of cryptocurrency. Therefore, users will not need to own Bitcoin, use a wallet password to protect their funds, or manage the investment process, making market entry easier. At the same time, ETFs contain many securities, which is a huge advantage for a portfolio and is also tax efficient.
However, as ETF investments increase, so do management fees, which can become overwhelming at some point since there are also multiple holdings in the asset. Unfortunately, this affects the accuracy of the total price in relation to the value of Bitcoin. Additionally, ETFs cannot be considered cryptocurrencies, making it impossible to trade them on exchanges like other currencies.
Finally, it is possible that Bitcoin could be regulated at some point in the future, as this would pose a challenge to the Bitcoin blockchain as decentralization would be lost, along with all the characteristics of a digital asset.
Are there other alternatives to BTC ETFs?
Bitcoin ETFs offer various advantages, but their disadvantages could lead investors to turn to other assets, such as Ether or Tether, which are less volatile and more reliable. Ethereum ETFs have also recently gained popularity and are accessible on most crypto exchanges like Binance. Additionally, these shares can be purchased on public stock exchanges. The best part is that there are now around 8,754 ETFs in the world, according to Statista, and the number is growing every year. So, despite the challenges and regulation, ETFs have the potential to become the next big thing on the market.
In a context of regulatory difficulties and delays by the SEC in the United States for the approval of ETFs, these assets only entered the European market after a year of postponement. Considering the importance of this for the crypto market, we expect ETFs to reach the right audience and become a reliable alternative to current crypto assets.