Passive investment in the world’s premier cryptocurrency: Bitcoin ETFs
For risk-averse people looking to invest in the largest cryptocurrency through traditional markets, Bitcoin ETFs can be a great alternative.
Due to their price volatility and rapidly shifting attitudes, cryptocurrencies may be daunting for investors for investment in traditional markets and result in quick gains or losses. However, a growing number of investors are eager to engage in this asset class due to the increasing levels of cryptocurrency usage and the significance of cryptocurrencies in a Web3 future.
Exchange-traded funds (ETFs), which track certain indexes, industries, commodities, or other assets, provide the best of both worlds. Thanks to a few newly launched Bitcoin ETFs, accessing cryptocurrencies is now possible without the inconvenience of needing to store or protect crypto tokens via an online or hardware wallet. In its first few days of existence, ProShares Bitcoin Strategy ETF invested almost $1 billion (BITO).
Through a broker or directly from ProShares, investors can buy BITO shares listed on the New York Stock Exchange Arca network.
A BTC futures contract, treasury securities and cash are all included in BITO, the world’s largest actively managed BTC ETF.
Shorting approach
ProShares Short Bitcoin ETF (BITI), which debuted in June 2022, is the newest entry in the BTC ETF market. BITI employs a shorting method to trade in a futures market with a cash payout and mimic the daily performance of BTC. BITI, which has assets of $62 million, is gaining popularity among investors who are more willing to make money from a decline in the price of BTC.
Investors may purchase shares in the following exchange-traded funds (ETFs) in addition to these two: Global X Blockchain & Bitcoin Strategy ETF, AdvisorShares Managed Bitcoin Strategy ETF, VanEck Bitcoin Strategy ETF, Valkyrie Bitcoin Strategy ETF (BTF), and XBTF (BITS). BTF aims to put almost all of its funds in BTC futures, with a $22 million AUM at the moment. BTF and BITO are presently trading at values that are almost 70% below their listing prices because of the virtually similar decline in the price of BTC from its all-time high of $68,890 in November 2021.
XBTF is set up as a C Corporation, which is a type of corporation that is legally defined by the fact that its shareholders and owners pay taxes to the government separately from the business itself. The fund reinvests dividends or long-term capital gains, which lowers the tax bill certain investors would otherwise incur from receiving taxable distributions. XBTF has outperformed BITO and BTF and has a lower expenditure ratio. Its size is comparable to BTF.
BITS divides its assets between futures contracts for Bitcoin and indirect investments in blockchain-related businesses that are well-positioned to profit from the growing popularity of the technology. In order to generate long-term capital growth for its investors, the fund takes long positions in BTC futures.
BITS has an $8.4 million AUM and invests more than half of it in the Global X Blockchain ETF (BKCH). Through BTC futures ETFs, BTC futures contracts, short-term fixed income assets, and cash or cash equivalents, the CRYP ETF is exposed to BTC. With an AUM of $172,000 and just 10,000 outstanding shares available for trading, it is the smallest of the six BTC ETFs.
Other than the six Bitcoin ETFs now approved by the US Securities and Exchange Commission, there are further proposals that might increase the number of Bitcoin ETF alternatives. Investors from all over the world may gain exposure to Bitcoin by selecting any Bitcoin ETF and taking advantage of the fully automated, transparent open and closing auctions in these ETFs offered by NYSE Arca.
None of these Bitcoin ETFs really hold Bitcoin due to concerns raised by the SEC over the cryptocurrency’s trading on unreliable cryptocurrency exchanges, but they do provide exposure to price fluctuations and the chance to profit from the long-term price rises.
None of these Bitcoin ETFs has shown a positive return on investment since their launch. Things may soon change, though, if Bitcoin starts to rise again.
Why do investors want a bitcoin ETF?
While investing in a bitcoin ETF would provide investors with simple access to the cryptocurrency realm, investing in bitcoin itself may be challenging. There are various factors that might simplify cryptocurrency investing, including a bitcoin ETF. First, it might be challenging to store and safeguard bitcoin itself. Investors who lost their passwords have been prevented from accessing their bitcoin on several occasions (sometimes with millions of dollars on the line). Data from cryptocurrency research and software company Chainalysis indicates that up to 18% of bitcoin may be misplaced or trapped in unreachable wallets.
ETFs’ ability to be traded directly from investors’ current brokerage accounts is another factor to take into account. Digital assets can now be bought and sold through mainstream crypto exchanges, but investors can still access ETFs through conventional channels.
edited and proofread by nikita sharma
