What is Bitcoin ETF? Are There Any Approved Bitcoin ETFs? Crypto enthusiasts have been speculating about the possible approval of a Bitcoin ETF and when it would happen. This editorial goes into further detail about an exchange-traded fund (ETF) and why it will have a long-term influence on the bitcoin market.
ETF Definition: Exchange-traded Fund
An exchange-traded fund (ETF) is a product that mimics the buying and selling individual stocks on stock exchanges. It follows the performance of an index, commodity, sector, or group of securities. Whether it’s the price of an item, a cryptocurrency, or, more specifically, Bitcoin, an ETF can be set up to follow the performance of any asset.
With an exchange-traded fund (ETF), investors do not have to worry about owning or trading the underlying asset. Investors could buy a piece of the support through the fund, splitting ownership into shares. Whether it’s dividends (if the assets, like stocks, share such) or earned interest paid, ETF shareholders get a cut of the funds’ profits.
Bitcoin ETF: Gateway to Traditional Investors
An important advantage of an exchange-traded fund (ETF) for Bitcoin is that it relieves investors of the responsibility of protecting the underlying asset, which is Bitcoin itself. Think about this seriously. Insufficient knowledge or storage space prevents many conventional investors from keeping their bitcoins safely. This is because the business is in its early stages, and it may not be easy to ensure the complete security of your bitcoins and private keys.
Are There Any Existing Bitcoin ETFs?
Noting that certain nations have already authorized products of this type is vital before delving into the particular benefits of a Bitcoin ETF. For instance, Canadian financial services firm Purpose Investments Inc. applied to the Ontario Securities Commission (OSC) for permission to introduce a Bitcoin exchange-traded fund (ETF) to certain provinces and territories in the country. In its first two trading days, the Purpose Bitcoin ETF amassed more than $400 million in assets. Because of this, There is a lot of demand for it, particularly from institutions.
Brazilian authorities have also approved a Bitcoin exchange-traded fund. The Sao Paulo stock exchange went online in March 2021 after QR Capital’s QBTC11 product was certified by the local regulator, the Securities and Exchange Commission (CVM).
However, many still believe that the United States is the most crucial country to authorize a Bitcoin ETF. However, the country’s SEC has been hesitant to do so thus far, repeatedly rejecting applications from corporations like VanEck and the Winklevoss Twins. The widespread belief is that the price of Bitcoin would skyrocket once the Securities and Exchange Commission (SEC) approves an exchange-traded fund (ETF), allowing institutions to have exposure to Bitcoin through an SEC-regulated vehicle.
Why is a US-approved ETF a Game Changer in Bitcoin’s Adoption?
To better understand the answer to this issue, we’ll examine Gabor Gurbacs’s work more closely. Gurbacs is the Director of Digital Asset Strategies at VanEck, one of the businesses actively trying to get a Bitcoin ETF in the US. Gurbacs states that among the many advantages of an exchange-traded fund are:
Increased Liquidity via the AP & ETF Ecosystem
More money will flow into space if there is a bigger pool of investors, which implies traders and investors have more liquidity to join and exit the market more efficiently.
Lower Counterparty Risk
Exchanges and investors benefit from reduced counterparty risk in a regulatory stable environment. Famous investor Kevin O’Leary told us in our interview that meeting regulatory requirements is a major obstacle for new institutions.
Better Valuation and Execution Practices
Crypto exchanges that provide a Bitcoin ETF should be held to the same rigorous standards as NASDAQ regarding regulatory compliance, achieved through regular and comprehensive business evaluations.
Separation of Duties: Trading, Custody, and Valuation
Coinbase is just one of many exchanges that have started to expand its offerings to include custody services. This action is probably part of their bigger strategy to introduce their ETF.
With the approval of ETFs, institutional Bitcoin trading will be formally legitimized, encouraging more large investors to join the market and, in turn, allowing exchanges to lower costs in response to increased trading activity.
Compliance With Global Regulations
In most cases, the traded assets see increased use as regulatory compliance increases, particularly globally. Because there isn’t enough regulation of cryptocurrencies, several governments are wary of endorsing their usage or have banned them entirely. While these governments may not be able to exert total regulatory control, they seek to ensure that their citizens can use Bitcoin exchanges by agreeing on the regulations about knowing your customer (KYC), fraud prevention, etc.
Asset Management Experience
Waiting for regulatory approval, thousands of seasoned asset managers are sitting on the sidelines, ready to offer their clients cryptocurrency as an asset to manage. Clients often knock on asset managers’ doors, demanding answers on when they may add cryptocurrency to their portfolio. The door would open for savvy asset managers to offer their customers better returns by investing in and trading Bitcoin and other cryptocurrencies if an authorized Bitcoin ETF were launched.
The entire Bitcoin industry would benefit greatly from an SEC-approved Bitcoin ETF. It would accomplish double duty: officially recognize Bitcoin as an investable asset and attract investors who have hesitated to put their money into the cryptocurrency due to the absence of a regulated way to do so.