Spot Bitcoin ETF and Its Existence in the US Investment Market
The American capital market has long refused the existence of spot Bitcoin ETF, believing that such an investment will be prone to manipulation and scam. But after refusing it for a decade, the US SEC (of Securities and Exchange Commission) has finally agreed to allow such a practice. This practice will track the Bitcoin price, allowing investors to reap profits without actually having to own the asset itself.
The Current Condition of Bitcoin ETF
SEC, supported by Wall Street, has finally agreed the Exchange Traded Funds concept. This step will allow regular (and ordinary) investors to invest in digital currency without having to bare all of the risks by themselves.
Up until now, SEC has provided green lights to some financial firms offering ETF practice. They have said yes to Franklin Templeton, Fidelity Investment, and BlackRock that have served retail investors as their clients.
It’s quite a surprise that SEC agreed on ETF concept. They previously only said yes to futures ETF, not spot ETF. Because of this change, the price of Bitcoin has increased – almost doubling in number. In fact, prices has increased for 61% since last October since rumor had been flying about SEC’s plan of saying yes to spot ETF.
Futures ETFs and Spot ETFs
What’s the difference of futures ETF and spot ETF, after all? Well, both practices are about tracking agreements for Bitcoin’s transaction (buying and selling) within the pre-agreed price. However, futures ETF doesn’t track precise price movement, while the spot does.
Moreover, the cost for rolling the contracts over is quite high. In most cases, it ‘eats’ up the returns. That’s why, not many investors are interested in having one.
How Is ETF Different from Common
Crypto Investment?
Moreover, spot ETF is different from the common Bitcoin purchase. In Bitcoin investment, you need to buy the asset in order to sell and buy it. In spot ETF, you can sell or buy the contracts; not the asset itself. Basically, you don’t need to own the asset to gain profits.
Some investors love the idea of spot ETF because they can get access to profits without the risks and complications. It also means that they don’t need to set any crypto accounts or wallets with the exchanges. In most cases, crypto exchanges have flaws in securities as they are easy to hack and they don’t actually have the best security records.
Final Words
SEC’s move is important because it affects the global action. Spot Bitcoin ETF has been around in Europe and Canada, but the US market is the biggest one in the world. Not to mention that it’s also the market where the world’s biggest institutional investors and asset managers can be found. Bitcoin ETF can be a good option when you want to have profitable investment.
Sources:
https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/BitcoinFuturesETF.html
https://www.cbsnews.com/news/bitcoin-etf-sec-approval-impact/
https://abcnews.go.com/Business/us-decide-bitcoin-investment-product-legal-matters/story?id=106253194#:~:text=A%20Bitcoin%20ETF%20allows%20investors,volatility%20and%20uncertainty%20of%20crypto.
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