Today, we are going to talk about What is a Bitcoin ETF? Its Benefits and Risks
A Bitcoin ETF is an exchange-traded fund comprised of bitcoin or assets related to Bitcoin’s price. They are traded on a traditional exchange instead of a cryptocurrency exchange. Theoretically, bitcoin is purchased by the company, securitized, and sold or traded on an exchange. However, the Security and Exchange Commission continues to reject these proposals; there is no cryptocurrency ETF directly representing an underlying coin.
Currently, the underlying assets within Bitcoin ETFs are linked to Bitcoin futures contracts traded on the Chicago Mercantile Exchange (CME).
The first concept for a Bitcoin ETF emerged shortly after investors and brokers noticed that bitcoin prices were trending upward and the cryptocurrency was becoming more popular. Most importantly, there appeared to be an opportunity to generate returns from buying and selling Bitcoin.
Benefits
First of all, the most important advantage of listing the Bitcoin ETF on the US stock exchange is the significant increase in the volume of Bitcoin transactions through the increase of capital by investment institutions and legal entities. In the long run, this will reduce the price volatility of Bitcoin and increase its market cap.
Another opportunity that is very valuable is the legality and formality of all the activities of this ETF. Many investors are preventing their capital from entering the cryptocurrency market due to the lack of very reliable legislation, which the Bitcoin ETF solves.
Ease of investing process is another valuable benefit of Bitcoin ETF. Investors who have concerns such as adequate market liquidity, investment security, as well as ease of the investment process, can enter the market through the Bitcoin ETF and benefit from it.
Risks
One of the most important disadvantages and risks that Bitcoin ETF brings to this cryptocurrency is the increase in centralization and control, which is contrary to the nature and ideal of the Bitcoin cryptocurrency.
Also, individuals who invest in an ETF fund do not acquire ownership of the assets within the fund. This means that people do not own real bitcoins and are only investing in the value of that bitcoin ETF fund.
Bitcoin ETF activity in the Exchange and Securities Organization requires authentication and financial transparency, which is a major threat to the privacy of Bitcoin cryptocurrency users.
