Bitcoin ETF – you would have probably heard about it. After all, it has been part of the world of traditional finance for a long time and there is a chance you could easily understand what we are going to discuss today on the subject of ETFs
Disclaimer: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own research and analysis before making any investment based on your personal circumstances.
What is an ETF?
An ETF, sometimes also called tracker, is an exchange traded fund, that is to say a fund that will replicate the performance, most often of an index. Indeed, the most traded ETFs will mimic an index such as the American SP500 for example, or the German DAX30.
ETFs can also replicate the performance of an industry or sector, such as pharmaceuticals, a currency or a commodity such as oil. Mostly, they trade on traditional market exchanges rather than crypto exchanges.
What is it for?
ETFs have several advantages, but the most obvious one is that they minimize management fees and allow you to gain exposure to an entire stock index without having to rebuild the portfolio yourself, by buying each stock in the index with the appropriate weighting. Management fees are typically 1% per year, which is less than the 2% often charged by investment funds.
For non-niche ETFs, those replicating global indices, liquidity is also an asset as they are traded on the world’s largest financial markets.
Simply put, an ETF allows you to diversify at a lower cost while offering you the same flexibility as buying a stock.
ETFs for cryptos?
ETFs for cryptos, for those of you who have been in the market since at least 2017, we’ve heard of them before and more than once. Indeed, since the last bull run and during the bear market that followed, every application for an ETF was seen as the key element that would bring institutional capital to the market.
Well, the truth was elsewhere as no ETF has been accepted in the US at the time of writing, but that has not stopped institutional capital from flowing into the market and fueling the bull market we are in. Even better, big private companies are also starting to buy BTC like Microstrategy and Tesla.
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But Bitcoin ETFs do exist!
Yes, and this is not a joke, the first ETFs on BTC are Canadian and are available on the Toronto Stock Exchange since last week. For those of you who are interested, their tickers are BTC and EBIT.
An impact for the crypto market?
As you have understood, the crypto market has not waited for the appearance of ETFs to become a little more mainstream. However the launch of a Bitcoin ETF could indeed be easier for those who find the current process of getting involved in crypto difficult or unsecure.
Currently, the process of creating an account for investing in crypto still seems a bit cumbersome or unsecure for some of us and having the possibility to expose oneself to the market through the traditional way is undoubtedly excellent news to some.
As for whether this will have a real impact or if it is ultimately just a consequence of a market that is gaining maturity, only time will tell!