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Everything you need to know about the Bitcoin ETF

Everything you need to know about the Bitcoin ETF

On Thursday, January 11, 2024, the Bitcoin ETFs finally received the green light. This opens the door to easier investment in the world of cryptocurrency. These new investment products aim to make Bitcoin more accessible. In this article, we will tell you the most important things you need to know about the Bitcoin ETF.

If you want to know more about the Bitcoin ETF, we will provide you with all the important information. So keep reading!

What is the Bitcoin ETF?

A Bitcoin ETF, which stands for "exchange-traded fund", is a specific type of investment fund that tracks the performance of Bitcoin. It works in the same way as other ETFs, allowing investors to invest in the price of Bitcoin through the stock exchange without actually owning the cryptocurrency itself. ETFs are regulated by the US Securities and Exchange Commission (SEC) and are traded on exchanges, just like individual stocks.

The Bitcoin ETF is an investment product that allows you to invest in Bitcoin in an easy and regulated manner. This ETF eliminates the need for you to buy, store, or manage the crypto yourself. This makes the Bitcoin ETF suitable for investors who want to diversify their portfolio and feel comfortable with taking higher risks and volatility.

There are different types of ETFs, but they can be categorized into two types: Futures & Spot ETFs.

Futures ETFs

Futures ETFs track the price of Bitcoin by using futures contracts. These are agreements to buy or sell an asset at a predetermined price and date in the future. Unlike owning physical Bitcoin, these ETFs consist of a wallet of Bitcoin futures contracts with various expiration dates and prices. By renewing these contracts before their expiration date, the ETFs try to accurately replicate the price movements of Bitcoin.

Futures ETFs are easier to get approval from regulators and are easily accessible for beginners, as they operate within the regulatory framework of supervised exchanges and brokers. Investors can buy and sell Bitcoin Futures ETFs through their regular investment accounts.

Spot ETFs

Spot Bitcoin ETFs are investment funds that actually own Bitcoin and attempt to directly track its price. They buy Bitcoin, store it securely, and then issue shares that represent a portion of that Bitcoin. Investors can buy and sell these shares on exchanges to profit from the value increase or decrease of Bitcoin.

The benefits of Spot ETFs include more accurate price tracking and the ability to lend or borrow them. Once approved, they could reduce errors in price tracking and show the true value of Bitcoin, but there may still be costs, such as management fees. A major advantage is that it allows investors to earn interest on their assets, for example, by lending them out.