Introduction of Bitcoin ETFs is Crucial step towards digital currencies

With the recent creation of the first Bitcoin exchange-traded fund (ETF) authorized to trade on US platforms, history was made. The price of Bitcoin and other crypto-assets rose in tandem with the hype and excitement surrounding this prospective (and now proven) acceptance.

The People’s Bank of China (PBoC) has once again banned Bitcoin and other crypto mining and trading operations in China, and this resurgence has been particularly optimistic.

Bitcoin achieved all-time highs almost immediately after the debut of this ETF product, and it continues to attract institutional interest and investment in the United States and throughout the world.

For digital currencies, this is a significant step forward

The approval of the first-ever Bitcoin ETF in the United States is noteworthy for a number of reasons. To begin with, this is the conclusion of years of work by blockchain and crypto industry supporters to make the crypto asset sector more democratic and egalitarian.

Second, authorizing an ETF product makes crypto intelligible and accessible to a much larger pool of investors, i.e., having crypto available in an ETF “wrapper” ensures that it will attract and reflect investor interest, as seen by the billions of dollars inflows into the product since debut.

Finally, and probably most critically, the acceptance of this first ETF product signals a shift in regulatory tone and, perhaps, a smoother route for the other ETF choices that have been submitted to the Securities and Exchange Commission for evaluation (SEC).

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Given the legislative uncertainty around blockchain and crypto assets, this is a huge step forward in terms of acceptance and implementation. However, there are a few things that potential investors should bear in mind before putting their money into this investment program.

There are advantages and disadvantages to each new financial instrument, and all of them should be considered before investing. Let’s take a look at a few things that every potential investor should keep in mind in the future.

Bitcoin is not tracked by the ETF

While market players should applaud the creation of the first-ever US-based Bitcoin ETF, it is crucial to emphasize that this product does not track Bitcoin. This ETF, on the other hand, is connected to and follows Bitcoin futures.

This may appear to be a little distinction, but it has significant ramifications for potential investors in terms of present and future profits.

The causes of these disparities are intertwined. The first is the price differential between Bitcoin spot and Bitcoin futures, and the second is the fact that the futures underpinning this ETF must be rolled forward on a regular basis.

Again, this apparently technical distinction might result in disparities in investor returns over time, which should be fully appreciated before making any investment decisions.

ETF’s Are Easy To Understand

The onslaught of bad news that can so frequently dominate debates around crypto exchanges and other organizations working in the area is something that many blockchains and crypto enthusiasts overlook.

Every investor, whether individual or institutional, has surely heard about the recent hacks, breaches, and thefts in the industry.

Furthermore, many non-expert investors may be hesitant to use technological apps such as hot wallets or commit their invested wealth to newcomers like Bitdenex.

ETFs are issued and managed by established broker-dealers and exchanges, and they may be bought and sold using standard brokerage accounts, removing what could otherwise be a significant barrier to entry.

To put it another way, making crypto a daily investing choice has necessitated working with established financial institutions.

Although crypto assets are a worldwide sector, one recurring difficulty that occurs during moments of the market volatility – both positive and negative – is that trading becomes difficult.

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To put it another way, when investors seek to acquire or exit market positions, the infrastructure of the still-developing crypto-asset industry might stymie them. Adding ETF products to the crypto asset market can help with broader market adoption and implementation in yet another way.

ETFs are traded as if they were equity securities, hence increasing the liquidity of various crypto assets. There is also the benefit of having all investments, taxes, and reporting duties contained with one service provider — for investors who do not want to add further complication to investing.

The development of cryptocurrency and Bitcoin ETFs, as well as other crypto products, has been a protracted process including input from private sector players, governments, and trade organizations.

Developing crypto-specific products and solutions for investors of all sizes will undoubtedly enable a larger and more diverse pool of investors to engage in the wealth generation process enabled by crypto.

That said, like with any novel notion or concept, it’s critical to grasp what’s being discussed, what these concepts mean, and how to incorporate them into current frameworks.

As crypto becomes more mainstream, this breakthrough can and should be recognized as an example of how such innovation may be developed upon.