Monday, 19 November 2018

Bitcoin and Cryptocurrency ETFs: Everything You Need to Know

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For those familiar with cryptocurrency trading, the process of buying and selling digital assets comes naturally. Unfortunately, this is not the case for many others — especially those that do not have the necessary knowledge and/or experience to deal with the security issues related to owning cryptocurrency.

Beginners would find existing cryptocurrency ETFs (exchange-traded funds) very appealing, although the heavily unregulated space these funds are operating from offer close to nothing in term of security for the investor that is just starting out. Additionally, they are not real cryptocurrency ETFs as most of them are operating out of their own volition, without support from financial institutions — but both a cryptocurrency ETF and Bitcoin ETF are on the horizon.

In this article, you will be able to learn more about these financial instruments and decide whether or not they are a good choice for you.

What is a Bitcoin ETF?

How does a bitcoin ETF work?

Crypto index fund investment opportunities

Wholesale investors

Coinbase

CoinJar

Grayscale Investments

Retail investors

XBT Provider

Huobi

OKEx


Investing in ETFs vs buying cryptocurrencies
Pros
Cons



What is a Bitcoin ETF?
Exchange traded funds (ETFs) are a type of index fund which provides a way for investors to participate in a portfolio of stocks — or, in this case, cryptocurrencies (or bitcoin specifically) — without actually going through the process of acquiring and securing these assets. Instead, they collaborate with financial entities that hold these assets for them and enable them to buy and sell as they please in exchange for a brokerage fee.

ETFs enable investors to speculate on the price movements and trade the underlying asset with delegated risks, as the entity that is providing investors with the ETF is responsible for maintaining the security of the assets — effectively alleviating the investor from this responsibility.

They can be based either on physical ownership or a futures contract, which is an agreement between two financial institutions that the assets will be bought at a future price, instead of the current one.

How does a Bitcoin ETF work?
The best way to understand the way that ETFs work is to compare it to company stocks.

ETFs are created based on the asset which the financial organization owns, and it tracks the performance of that particular asset (or asset group). 

The price movement of the assets is reflected in the price of each ETF stock, making either profit or losses for investors.

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