The recent approval of Bitcoin Spot Exchange-Traded Funds (ETFs) by the U.S. Securities and Exchange Commission has opened up a new opportunity for traditional investors seeking exposure to the world's most popular cryptocurrency. In this beginner's guide, we'll explore what exactly Bitcoin Spot ETFs are, their benefits and risks, and things to consider before investing in these new financial instruments.
What are Bitcoin Spot ETFs?
Bitcoin Spot ETFs are exchange-traded funds that hold actual Bitcoin as their underlying asset, unlike Bitcoin Futures ETFs which provide exposure through derivatives contracts. The ETF owns the cryptocurrency on behalf of investors, allowing them to gain direct price exposure without having personal custody of Bitcoin.
Why Bitcoin Spot ETFs?
Ease of Access: Bitcoin Spot ETFs provide a convenient and regulated way for investors to gain exposure to Bitcoin without the complexities of managing private keys or dealing with unregulated exchanges.
Liquidity: Being traded on established stock exchanges, Bitcoin Spot ETFs offer high liquidity, allowing investors to buy and sell shares with ease during regular trading hours.
Regulatory Compliance: ETFs are subject to regulatory oversight, providing investors with a level of security and transparency that may be lacking in some cryptocurrency exchanges.
Portfolio Diversification: Bitcoin Spot ETFs enable investors to diversify their portfolios by including exposure to the cryptocurrency market alongside traditional assets.
11 Spot Bitcoin ETFs Approved
The regulator gave the green light to the following products:
ARK 21Shares Bitcoin ETF (ARKB)
Bitwise Bitcoin ETF (BITB)
Fidelity Wise Origin Bitcoin Trust (FBTC)
Franklin Bitcoin ETF (EZBC)
Grayscale Bitcoin Trust (GBTC)
Hashdex Bitcoin ETF (DEFI)
Invesco Galaxy Bitcoin ETF (BTCO)
iShares Bitcoin Trust (IBIT)
Valkyrie Bitcoin Fund (BRRR)
VanEck Bitcoin Trust (HODL)
WisdomTree Bitcoin Fund (BTCW)
Difference between ETF and Crypto Exchange
Custody and Security: One major advantage of a Bitcoin ETF is that the actual cryptocurrency is held in custody by the fund's regulated custodian. Investors don’t have to worry about the complexities and risks of safely storing private keys themselves. In contrast, Bitcoin held on a cryptocurrency exchange depends on the security measures implemented by the exchange. If withdrawing to a private wallet, the investor takes on the responsibility of secure storage.
Regulation: ETFs that trade on major stock exchanges like the NYSE and Nasdaq must follow stringent rules and compliance standards enforced by financial regulators. Cryptocurrency exchanges have varying levels and quality of regulation across different jurisdictions. Some operate in legal grey areas without clear regulatory oversight.
Investment Process: For mainstream investors, getting started with a Bitcoin ETF is as simple as opening a brokerage account to buy shares. In contrast, investing directly in Bitcoin requires registering with a cryptocurrency exchange, funding your account, and learning to navigate the exchange interface.
At CryptoConsultz, our team of industry experts understands the ins and outs of cryptocurrency. We help investors cut through the noise to determine the best fit based on their risk appetite, preferences and portfolio strategy. Our guidance provides the insights you need to invest in crypto with clarity and confidence.