A Bitcoin ETF combines two prevalent forms of investment, ETFs and cryptocurrencies, into one package. But, What Exactly Is It? What Time Does Bitcoin ETF Launch in the US? Let's see.
What is Bitcoin ETF?
A Bitcoin exchange-traded fund is a type of investment vehicle that aims to follow digital currency's price. Bitcoin ETFs are not traded on cryptocurrency exchanges; they are exchanged on traditional, regulated securities exchanges.
The Australian Securities and Investment Commission regulates any Bitcoin ETF made available in Australia (ASIC). Without needing to register for a cryptocurrency exchange and create a cryptocurrency wallet, investors can access the digital asset.
What Time Does Bitcoin ETF Launch in US?
The first petition to start a Bitcoin spot ETF was denied by the Securities and Exchange Commission (SEC) in 2017. Later attempts with a futures-based fund had more success. In October 2021, trading in the BITO ProShares Bitcoin Strategy ETF started. BITO aims to track the price of Bitcoin futures contracts traded at the Chicago Mercantile Exchange (CME). According to news reports, BITO grew at 'record speed' following the launch, quickly reaching US$1 billion in assets.
To date, the SEC has not approved a Bitcoin spot ETF.
How Does a Bitcoin ETF work?
Investors can gain access to Bitcoin directly or indirectly through two different methods: spot Bitcoin ETFs and Bitcoin futures ETFs. Here is how each product works.
1. Spot Bitcoin ETFs
Physical Bitcoins serve as the foundation for the value of a spot Bitcoin ETF. Generally speaking, you can expect an increase in the value of your investment if the value of the digital coins that support the ETF rises. Simply said, the investment should grow in value if the price of bitcoin does.
The most direct option to invest in Bitcoin without purchasing it on a crypto exchange and holding the coins is through a physically-backed Bitcoin ETF. In this case, the fund holds them.
However, there are some drawbacks. For instance, unlike the crypto market, which trades continuously, investors can only trade an ETF during regular market hours for regulated securities exchanges.
2. Bitcoin futures ETFs
A Bitcoin futures ETF holds futures contracts over bitcoin rather than the actual currency; it does not own any bitcoin as its underlying assets.
Through an agreement that sets a fixed price and a future date for delivery of an asset, or the cash equivalent value, a futures contract can enable investors to profit from increasing prices.
A futures-based Bitcoin ETF is not directly exposed to the risks of cryptocurrency storage because it does not own any actual bitcoin.
Due to the process of "rolling" futures contracts at regular intervals in order to preserve investment exposure, which can result in gains or losses to the investor, investing in Bitcoin futures might cause Bitcoin futures to trade at a premium or discount compared to the spot price.
What Time Does Bitcoin ETF Launch in US? What are Spot Bitcoin ETFs and Bitcoin Futures ETFs? -- I hope this article can help you to gain some knowledge.
