What is Bitcoin ETF? That is a term used to refer to a type of fund traded on the stock exchange, to invest mainly in Bitcoin. This fund was created to give investors who do not want to invest in cryptocurrencies the opportunity to access Bitcoin without having to own it.
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What is a Bitcoin ETF?
Bitcoin ETF is fully written as Bitcoin Exchange-Traded Fund. This is a term used to refer to a type of fund traded on the stock exchange. The sole and biggest goal of this fund is to focus on investing in Bitcoin.
The special feature of Bitcoin ETF is the same structure as traditional ETF, thereby allowing transactions to be carried out as usual. Besides, the price of Bitcoin ETF always closely follows the price of Bitcoin, meaning that when the price of Bitcoin increases, the price of Bitcoin ETF will increase and vice versa.
With the above characteristics, it can be said that Bitcoin ETF is the best solution for traditional investors who want to participate in the Bitcoin market but do not want to own it. Thereby helping these investors be safer, and reducing significant risks from this market.
How many types of Bitcoin ETFs are there?
At present, there are only two main types of Bitcoin ETFs:
- Bitcoin Physical ETF: This type of ETF works like traditional ETFs, making direct investments in actual Bitcoin. That is, by buying and holding Bitcoin in the fund, investors can participate in investing by buying shares. shares in the ETF but do not directly own Bitcoin.
- Bitcoin Futures ETF: This type of ETF does not buy Bitcoin directly, but invests in futures contracts related to the price of Bitcoin. Investors can participate in investing by purchasing shares created from the current price of Bitcoin. a contract unit.
Some information related to Bitcoin ETFs that you can read more about: Crypto ETF, Ethereum ETFs, Multi-Crypto ETF
Advantages and disadvantages of Bitcoin ETF
Advantage
- Easy to participate in, and does not require investors to learn how to use cryptocurrency wallets or open accounts at relevant cryptocurrency exchanges.
- Diversify your investment portfolio with many Bitcoin-related assets, even if it only includes Bitcoin, investors can still choose Bitcoin ETF to diversify their portfolio holdings.
- High safety and security because investors do not directly own Bitcoin, so if something goes wrong, the fund will be the one to solve the problems that arise.
- The price is easy to invest in, especially for small investors who do not have large capital resources when Bitcoin ETF allows investors to gain exposure to Bitcoin within their budget.
Disadvantages
- Using a Bitcoin ETF, advisors must accept accounts that collect an annual management fee instead of paying trading fees on the cryptocurrency exchange, which can be prohibitive in the long run.
- Unlike cryptocurrency markets that are often allowed to trade 24/7, Bitcoin ETF will only trade depending on the opening and closing times of the stock market.
- With Bitcoin, you can use it to perform some convenient services, but not with Bitcoin ETF. This will cause an immediate loss of liquidity.
- The Bitcoin ETF tracks and monitors the price of Bitcoin, but it is possible for the value to not match the actual price.
Why is Bitcoin ETF important?
From what we mentioned earlier, we can see that Bitcoin ETF is of great importance because:
- Allows investors to diversify their investment portfolio without needing to own Bitcoin or spend a lot of time learning about the market.
- Simulates the value of the world’s largest cryptocurrency, Bitcoin, allowing investors to easily access it without having to perform complicated transactions.
- Investors are guaranteed the best safety and security because they do not need to invest directly in Bitcoin.
- Allows investors to conduct short selling, which is not possible in traditional trading.
Conclusion
Here is all the information about the most understandable content that we can share with you about Bitcoin ETF. If you have any other questions, don’t hesitate to contact AZcoin.
I am Tony Vu, living in California, USA. I am currently the co-founder of AZCoin company, with many years of experience in the cryptocurrency market, I hope to bring you useful information and knowledge about virtual currency investment.
Email: [email protected]
