What is a Bitcoin ETF? - BreadHero

What is a Bitcoin ETF?

bitcoin etf

Before talking about a Bitcoin ETF, let’s talk about ETFs in general. An ETF, also known as an Exchange Traded Fund, is a widespread investment tool allowing users to participate in market affairs without overexposure to risk.

Traded on exchanges in a similar fashion to stocks, ETFs are a popular tool amongst investors because they are instrumental hedging opportunities in the event of economic collapse and uncertainty.

While stocks focus on a single company, ETFs are associated with an index, commodity or entire industry. This diversification is prevalent amongst large investors and wealth management corporations, as an ETF is an investment vehicle that not only promotes wealth retention but is posed for long future investments without much overhead.

What Are The Benefits of a Bitcoin ETF

Many people who invest in ETFs come from traditional finance backgrounds and are risk-averse due to the large amount of capital that they manage.

Whilst investors might have an interest in Bitcoin which is still considered a speculative asset, the mistrust, uncertainty, and volatility surrounding the asset have prevented many investors from getting into the space.

Henceforth, Bitcoin ETFs are a formidable medium to introduce traditional investors into the space due to the regulatory processes one must go through for ETF approval.

This would introduce legitimacy into a space that has been scrutinized by skeptics weary of the cryptocurrency space and still associate it with malevolent business practices.

In addition, this would likely open the floodgates for many investors to come into the cryptocurrency space as many of them don’t want to go through the trouble of managing their own keys, but see Bitcoin as a legitimate investment vehicle.

The Road to Bitcoin ETF Approval

Unfortunately, the road to Bitcoin ETF approval has been stalled with regulatory concerns, constant delays and it is still unknown when a Bitcoin ETF will be implemented. 

However, investors remain optimistic as the notorious Winklevoss twins, VanEck and Bakkt run by the former head of the NYSE are pushing for regulatory measures. 

Both traditional investors and cryptocurrency enthusiasts have expressed support and positivity as the SEC has opened ETF applications to public commentary. 

At present, there is more optimism and support from banks and traditional investors than ever. Some banks such as JP Morgan who just two years ago called Bitcoin a scam are now supporting the technology soon after they’ve created their own cryptocurrency. 

There is a clear demand in interest, and a Bitcoin ETF approval is on the horizon as investors push for more opportunities to diversify.

Bitcoin ETFs Are Counterintuitive

A Bitcoin ETF best exemplifies its use case with the added liquidity, legitimacy and streamlined access it brings to the cryptocurrency space. However, it is important to acknowledge the contingency that is associated with investing in Bitcoin through an ETF. 

ETFs are traditionally for investors concerned with returns and profits, not concerning themselves with actual ownership of said ETF, just the rights to the returns. 

One of the major selling points of Bitcoin is the idea that Bitcoin holders act as their own bank and rid themselves of necessary third-party systems associated with transaction fees and delays in banking. 

Therefore, one might say investing in Bitcoin through an ETF without actual ownership or the ability to transact Bitcoin is counterintuitive. 

bitcoin etf laptop with coin

The Bottom Line on Bitcoin ETFs

While this may be true and many see Bitcoin ETFs as controversial entities, two things are still certain. First, Bitcoin ETFs will promote regulatory measures, appealing to those who were previously skeptical of the cryptocurrency and will eliminate any issues with fraud or illegitimacy. 

Second, a Bitcoin ETF will onboard multiple wealth asset class managers, hedge funds and large amounts of liquidity will enter the space now that individuals don’t need to be responsible for their own storage devices. 

These two benefits are more than enough for crypto enthusiasts to support the idea of Bitcoin ETFs and so far, many have. 

While the approval thus far has been somewhat of a drawn-out process, we are undoubtedly inching closer to its inception as more investors and institutions alike are onboarding the concept of digital currencies, opening Bitcoin trading desks and looking to take the asset class seriously. 

Immense strides are continuously being made, and an ETF would solidify Bitcoin as a hallmark in asset classes.



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