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 Crypto ETFs 

20 April 2022| ZebPay Trade-Desk

In traditional investing, an ETF is a form of investment that tracks the price of an asset or group of assets. ETFs provide an easy way to invest in multiple assets at once without actually owning those assets. 

 In the case of Bitcoin, a Bitcoin ETF is an asset that simply tracks the price of Bitcoin. By investing in a Bitcoin ETF, users can continue to benefit from Bitcoin income without having to go through the process of acquiring Bitcoin, such as investing in Bitcoin. B. registering with exchange and going through various verification methods. However, the Bitcoin ETF itself is quite limited. The first  Bitcoin ETF, the ProShares Bitcoin Strategy ETF (BITO), was launched in October 2021. However, this ETF doesn’t invest directly in the asset, instead of investing in bitcoin futures exchange-traded funds, which makes ProShares’ offering more of a “fake” ETF.

A bitcoin futures ETF is an agreement to buy or sell bitcoin at a specific price on a set date. For example, when buying through the ProShares Bitcoin Strategy ETF, an investor could enter into a contract with ProShares to buy $10,000 worth of bitcoin on June 15, regardless of the actual value of bitcoin on that date. Despite the volatility of the asset, why choose to buy bitcoin at a later date? This is because they have reason to believe that the price of bitcoin will be lower by then and the whole process will be run by the platform and not the user. Additionally, traders can also short the asset and create a purchase agreement. Sure, one could  buy any amount of Bitcoin at any time without ProShares, but a futures ETF ensures  users can invest in digital assets without worrying about exchanges. This method also costs fewer fees  compared to most crypto exchanges. However, a futures ETF does not involve investing in bitcoin at the spot price, so some enthusiasts may not view the offering as a “true” crypto adoption. 

Additionally, companies offering a bitcoin futures ETF may charge annual fees to keep contracts and accounts open. That, and these ETFs occasionally can’t accurately track Bitcoin’s price.

A bitcoin spot  ETF offers all the benefits of a futures ETF, e.g. B. investing in Bitcoin without using an exchange, paying fewer fees than on a crypto exchange, and streamlining the whole process. But a spot ETF invests in Bitcoin on the spot. Right, a spot ETF invests in bitcoin at its spot price, which means buyers hold bitcoin in their contracts. Enthusiasts see a spot ETF as a more legitimate investment method  because a spot ETF involves holding bitcoin. However, there is currently no true bitcoin spot ETF due to the emerging nature of the industry. Crypto industry insiders often fight a company to launch a bitcoin spot ETF, believing that markets will take bitcoin seriously once a spot ETF is set up.

Crypto firms have struggled for years to legitimise a bitcoin spot ETF in the United States, but the SEC has yet to give up despite its two supposedly “crypto-positive” presidents. For example, Jay Clayton, who served as SEC chief from May 4, 2017, to December 23, 2020, is a fan of Bitcoin as a store of value. However, none of the proposals convinced Clayton that a Bitcoin ETF of any kind was ready. Clayton’s successor, Gary Gensler, approved the ProShares BITO. Other ETF proposals including  Valkyrie and Van Eck were also approved. However, one company, Grayscale, could be the first to implement a bitcoin spot ETF. 

 Grayscale, which owns the world’s only publicly traded SEC-approved Grayscale Bitcoin Trust (GBTC), proposed its Bitcoin  ETF to the SEC in 2016. The group briefly withdrew its application in 2017 due to a dead call. As of March 2022, Grayscale remains committed to making GBTC  the world’s first bitcoin spot ETF, even threatening to sue the SEC if their recent Attempts fail. In contrast, the SEC claims that market manipulation is its number one obstacle to approving a bitcoin spot ETF. 

While bitcoin spot  ETFs are certainly more “legitimate” than bitcoin futures ETFs because they involve buying bitcoin, it’s difficult to say which is better. Finally, a bitcoin futures ETF may not involve buying at the spot price of bitcoin, but it streamlines the buying process and allows investors to bet on the market whether they choose to short or not. . Similarly, some bitcoin futures ETFs have trouble accurately tracking bitcoin’s price, and many charge annual fees to enter into contracts with the company. 

In contrast, a bitcoin spot ETF will, according to many bitcoin enthusiasts,  bring “legitimacy” to the asset as it allows users to invest in bitcoin without actually owning it, at the actual bitcoin price.

While the only bitcoin ETFs out there are bitcoin futures ETFs, there are quite a few to invest in. This article previously mentioned the ProShares BITO Bitcoin Futures ETF, which currently has around $1 billion in investments. BITO is listed on the Chicago Mercantile Exchange (CME). Another Bitcoin ETF is the Valkyrie Bitcoin Strategy ETF. Valkyrie also offers bitcoin futures ETFs and is listed on the Nasdaq under the ticker BTF. Next, we have the VanEck Bitcoin Strategy ETF. The VanEck Bitcoin Strategy ETF provides users with access to Bitcoin futures ETFs and trades on the CBOE exchange under the ticker XBTF. 

There are several other bitcoin futures ETFs on the market, but the ones listed above are some of the most popular. Which ETF is better obviously depends on the user as they are available on different exchanges which can vary in price.

References:

https://coinmarketcap.com/
https://abracadabra.money/
https://cointelegraph.com/

Disclaimer:

This report is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation, or needs of any investor. All investors should consider such factors in consultation with a professional advisor of their choosing when deciding if an investment is appropriate. The Company has prepared this report based on information available to it, including information derived from public sources that have not been independently verified. No representation or warranty, express or implied, is provided in relation to the fairness, accuracy, correctness, completeness, or reliability of the information, opinions, or conclusions expressed herein. This report is preliminary and subject to change; the Company undertakes no obligation to update or revise the reports to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. Trading & Investments in cryptocurrencies viz. Bitcoin, Bitcoin Cash, Ethereum, etc. are very speculative and are subject to market risks. The analysis by the Author is for informational purposes only and should not be treated as investment advice.

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