Summary
- Bitcoin ETF is an ETF that is linked to the price movement of bitcoin
- Bitcoin ETF could be a catalyst for the growth of the Cryptocurrency market.
In October 2021, the first bitcoin (futures)-linked ETF will be listed in the United States, and it has become a hot topic around the world.
Although Bitcoin ETF is attracting much attention, many people probably do not understand what is attracting such attention.
In conclusion, the approval of the Bitcoin ETF in the United States is important news that could lead to a rise in the price of virtual currencies in the future.
The First Bitcoin Futures ETF Listed in the U.S.
- History of Bitcoin ETF
- What is an ETF?
- Differences between Bitcoin ETF and Cryptocurrency ETF
- High reliability in terms of security
- Becoming a more accessible investment target
- A catalyst for the growth of the Cryptocurrency market
3 Disadvantages of Bitcoin ETF
- Management fees are required
- It cannot be traded 24 hours a day
- Physical Bitcoin ETF is not yet listed
The First Bitcoin Futures ETF Listed in the U.S.
Bitcoin ETFs listed in the U.S. are a hot topic.
On October 19, 2021, the first Bitcoin futures ETF in the U.S., the ProShares Bitcoin Strategy ETF (BITO), began trading.
Trading on the first day attracted much attention, with prices rising nearly 5% from the start of trading and bitcoin hitting a six-month high on the same day.
In addition, on October 22, the Valkyrie Bitcoin Strategy ETF (BTF) was listed, the second in the U.S.
More Bitcoin ETF will likely be approved in the U.S. in the future.
History of Bitcoin ETF
There have been applications for Bitcoin ETFs in the U.S. since 2013.
However, applications were rejected due to problems with the management system.
The situation began to change in February 2021 when Canada approved the "Purpose Bitcoin ETF (BTCC).
After that, the Bermuda Stock Exchange also started trading the Bitcoin ETF, and the possibility of approval in the U.S. increased.
In addition, the appointment of Gary Gensler as chairman of the U.S. Securities and Exchange Commission, who has a deep understanding of crypto assets, is said to have triggered the approval.
"So getting approved in the world's largest U.S. market must have had a significant impact!"
What is a Bitcoin ETF?
A Bitcoin ETF is an ETF that is linked to the price movements of bitcoin, a type of Cryptocurrency.
It's hard to summarize in a few words, so let's start by reviewing the essential ETF characteristics and how they differ from Cryptocurrency ETF.
What is an ETF?
ETF (Exchange Traded Funds) are listed investment trusts, that is, investment trusts that are listed on exchanges such as the Tokyo Stock Exchange.
Since ETFs are listed, they can be traded in real-time through exchanges, just like stocks.
Differences between Bitcoin ETF and Cryptocurrency ETF
Bitcoin ETF is often thought of as Cryptocurrency ETF, but strict differences exist.
A summary is as follows
- Bitcoin ETF
→Linked to the price movement of bitcoin only
- Cryptocurrency ETF
→Linked to an index made up of multiple virtual currencies
In addition to bitcoin, Cryptocurrency ETFs combine multiple virtual currencies such as Ethereum and Litecoin.
For example, the Hashdex Nasdaq Crypto Index ETF (HASH11), traded on the Bermuda Stock Exchange, is a Cryptocurrency ETF that aims to be linked to the Cryptocurrency index provided by Nasdaq.
"So a Bitcoin ETF is only linked to the price movement of bitcoin!"
3 Advantages of Bitcoin ETF
The following are the three main advantages of Bitcoin ETF
- High reliability in terms of security
- Becoming a more accessible investment target
- A catalyst for the growth of the Cryptocurrency market
Let's take a look at each of these.
(1) High reliability in terms of security
Many countries have not approved Bitcoin ETF due to concerns about price volatility and the unhealthiness of the market.
However, the listing of Bitcoin ETF on the New York Stock Exchange, one of the world's largest markets, has increased its credibility.
If this approval leads to a higher evaluation of security in the future, it should make it possible to invest in virtual currencies with greater confidence.
"ETF seems to be safer than buying directly from a Cryptocurrency exchange!"
(2) Becoming a more accessible investment target
The advantage of Bitcoin ETF is that they are "ETF" and allow for an easy diversification of investments.
Stock exchanges, which are the exchanges for ETF, have higher liquidity than Cryptocurrency exchanges, allowing for smooth trading.
Also, in Bitcoin ETF, the fund owns the actual bitcoins.
As a result, there is no need to store the crypto assets yourself, and the risk of them being stolen due to hacking is significantly reduced.
"The fact that it's in the form of an ETF makes it much easier and less risky!"
(3) A catalyst for the growth of the Cryptocurrency market
The Cryptocurrency market has repeatedly risen and fallen, but Bitcoin ETF can be catalysts for market growth.
For example, on October 16, 2021, the bitcoin price reached a record high after the approval of the first bitcoin futures linked ETF in the United States.
Furthermore, the approval of the Bitcoin ETF was eagerly awaited by many investors, and institutional investors are expected to enter the market in the future.
The spread of Bitcoin ETF will contribute significantly to the further growth of the Cryptocurrency market.
"Keep your eyes peeled for more Cryptocurrency ETF-related news!"
3 Disadvantages of Bitcoin ETF
The three main disadvantages of Bitcoin ETF are as follows
- Management fees are required
- It cannot be traded 24 hours a day
- Physical Bitcoin ETF is not yet listed
Let's take a look at each of them.
(1) Management fees apply.
There is no management fee when you hold bitcoin on your own, but a management fee is required for Bitcoin ETF.
However, management fees for ETF are often set at a low level.
"When buying, let's take a look at the management fee."
(2) You can't buy and sell 24 hours a day.
While virtual currencies can be traded 24 hours a day, 365 days a year, Bitcoin ETF can only be bought and sold during the exchange's trading hours.
So if the price of bitcoin fluctuates significantly outside of trading hours, be aware that you may not be able to buy or sell immediately.
"You need to be careful if you're thinking of trading at night!"
(3) Bitcoin physical ETF is not yet listed
Bitcoin futures ETF have been approved in the U.S., and physical Bitcoin ETF has not yet been listed.
Futures trading is considered more expensive than physical trading because of the hefty price movements.
For this reason, many investors are hesitant to enter the Bitcoin ETF market at this stage, when only futures ETF is listed.
However, applications for physical Bitcoin ETF are underway in the U.S., and it won't be long before they are listed.
"Here's hoping for the approval of a physical Bitcoin ETF!"
Summary
This article has focused on Bitcoin ETF information, which is currently the focus of attention, including its advantages and disadvantages.
Finally, we will summarize the three most essential points in this article.
- Bitcoin ETF is an ETF that is linked to the price movement of bitcoin
- Bitcoin ETF could be a catalyst for the growth of the Cryptocurrency market.
The widespread use of Bitcoin ETF can make buying and selling virtual currencies easier.
The focus on blockchain technology and virtual currencies, such as Metaverse and NFT, will continue to grow in the future.
Let's continue to keep an eye on Bitcoin ETF-related topics.
