As the price of bitcoin has risen since its first appearance, investors have been looking for ways to get some of the profits from the cryptocurrency. Financial companies have struggled to create products that fuel investors' appetite for cryptocurrencies, and last fall, the long-awaited Bitcoin futures trading fund (ETF) appeared.
A new bitcoin-related fund, ProShares Bitcoin ETF strategy (Beto), gives traders the opportunity to speculate on bitcoin without having to buy cryptocurrency directly or create an account on a crypto exchange. Investors can simply buy and sell the fund, as with any other stock trading on the stock exchange, which makes it easier to get started.
But experts say the path to more crypto ETFs looks bumpy, although many stock companies would like to get a reduction in the healthy fees that can be charged for the operation of ETFs based on fashionable assets.
Here's what you should know about Bitcoin ETFs.
Why are Bitcoin ETFs becoming more popular?
Many people have been attracted to bitcoin because of its rapid price growth since it was first introduced in 2009. Even though it has fallen more than 40 percent since its all-time high in November 2021, bitcoin has still risen significantly since its debut. Naturally, the price increase makes many people think about how they can take part in the event.
One aspect of buying and selling bitcoin that may have hindered some people is the limited number of brokers offering it, and trading directly through a crypto exchange can be complicated by various fees and new trading platforms. But with the introduction of bitcoin-related ETFs, the investment process can become much easier.
"By opening the doors to large investors through bitcoin ETFs, many investors can participate in indirect investments in bitcoin, but without owning the digital asset itself, which can help alleviate the concerns felt by many newcomers," says Peter Jensen, CEO of blockchain payment company Rocket Fuel blockchain.
Who should Invest in a Bitcoin ETF?
Investing in a bitcoin ETF can be a good option for people who are looking for a more traditional way to invest in a digital currency. Investing directly in bitcoin can be difficult and involves questions about how assets are stored and on which exchange to buy. ETFs eliminate some of this complexity by packaging crypto futures contracts as ETFs.
The structure of the ETF may also make it easier for some institutional investors to enter the crypto market, which may help keep the demand for bitcoin at a high level.
"Bitcoin ETFs allow ordinary institutional investors to access bitcoin without worrying about storing bitcoin in hot wallets that are more vulnerable to hacking, as well as the regulatory and financial consequences their money will face if they simply buy it on a decentralized cryptocurrency exchange," says Kai Haimani, managing director Spectre.ai, a trading platform without a broker.
Where can you buy a Bitcoin ETF?
Bitcoin ETFs will be available through most online brokers that offer traditional securities such as stocks and bonds. Some of these brokers may also provide an opportunity to invest in bitcoin directly, while others allow you to trade only bitcoin futures.
ETFs are traded on traditional stock exchanges such as the New York Stock Exchange or Nasdaq. If you are interested in the widest offer of cryptocurrencies and want to invest directly in digital currencies, you will need an account on a crypto exchange such as Binance or Kraken.
Are Bitcoin ETFs regulated?
Creating any ETFs tied to bitcoin has proven to be a daunting task. The launch of the ProShares Bitcoin ETF strategy last fall marks the first bitcoin-related ETF, but the fund itself uses futures contracts instead of direct investment in bitcoin. The Securities and Exchange Commission has not yet approved ETFs that invest directly in bitcoin due to a number of factors.
"Regulatory issues related to ETFs include the structure of management fees, questions about the true intrinsic value of bitcoin and, of course, the fact that the underlying asset in question still has an uncertain regulatory future," Kimani says.
Chris Klein, executive director and co-founder of the Bitcoin IRA cryptocurrency platform, points to other reasons.
"In accordance with the previous provisions, regulators are concerned, namely the possibility of manipulation of digital assets, problems related to volatility and lack of monitoring," says Klein.
At the moment, the number of crypto ETFs available in the US is still small, but other jurisdictions, including Canada and Europe, have approved more funds.
"Crypto ETFs are inevitable," says Klein. "A product like this will eventually pay off because there is demand for it, but the timing is still uncertain.”
In March, President Joe Biden signed an executive order instructing federal agencies to study the impact of cryptocurrencies on consumers, businesses and investors. The audit will also examine the possibility of creating an American "digital dollar"."This is likely to lead to new laws and regulations that have largely not existed in the crypto industry until now.
Other types of investments related to cryptocurrencies
If you are not satisfied with the current limited supply of cryptocurrency-related ETFs, you have several other options for investing in the world of digital currencies.
Invest in cryptocurrency directly
You can always choose to invest directly in cryptocurrencies through a broker or a crypto exchange. Some brokers offer a limited number of options for investing in cryptocurrency, usually they offer only major currencies. If you are looking for a wide offer, you will need to make a cryptocurrency exchange, but be careful and pay attention to the expensive fees associated with buying and selling.
Exchange-traded funds traded on the blockchain
Another way to make investments related to cryptocurrencies is to invest in ETFs focused on blockchain, the technology underlying cryptocurrencies such as bitcoin and Ethereum. Blockchain ETFs contain shares of companies that use blockchain technology as part of their current and future business plans. Acquisitions are likely to include a range of crypto companies, tech giants and financial institutions.
Shares of crypto companies
There is also the possibility of investing in shares of companies that are directly involved in cryptocurrency. Coinbase, a major crypto exchange, went public in 2021, and other companies such as PayPal and Robinhood have also taken a step towards cryptocurrencies. Be sure to carefully study each company and understand how their business is related to cryptocurrencies before investing.
Grey Bitcoin Trust
The Bitcoin Trust Fund was created in 2013 as a private investment with a six-month lockdown that prevented investors from reselling it on the public market during this period. But some investors have since sold their shares on the market, so now anyone can buy shares of the fund. The Fund charges a fee of 2 percent of the assets under management per year.
The company behind the fund announced in October that it plans to switch to a bitcoin spot ETF fund. The fund will provide investors with a way to track the price of bitcoin in a structure familiar to ETFs.
Bottom line
Traders are looking forward to bitcoin ETFs, their desire appeared last fall when the first bitcoin-related ETF began trading on the New York Stock Exchange. But crypto enthusiasts will most likely have to wait a little while for an influx of such ETFs to appear on the market due to regulatory problems from the Securities and Exchange Commission. However, there are ways to participate in crypto assets through stocks and ETFs that are indirectly related to crypto technologies or blockchain. You can also invest directly through a crypto exchange.
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