The era of cryptocurrencies has undoubtedly become one of the most groundbreaking moments in the financial history of the 21st century. However, for many, the concept of buying Bitcoin remains unclear and uncertain. Bitcoin ETF, a stock market-based investment fund based on Bitcoin, may be the solution to these concerns. What is it and why is it attracting so much interest in the financial world?
Bitcoin, although it has been gaining in popularity for years, is still too complex for many. Technical aspects, such as cryptocurrency wallets, Bitcoin addresses, and private keys, effectively deter newcomers. Bitcoin ETF significantly simplifies the entire process.
Two words of explanation – an ETF is an investment tool that is publicly listed, just like stocks. It tracks the performance of a specific asset or index rather than a single company. ETFs give investors the opportunity to invest in the value of their underlying assets, such as gold or oil, and are listed on traditional stock exchanges.
Bitcoin ETF works similarly. Investors buy shares in the ETF through any brokerage they use to buy stocks and can trade them in the same way they trade shares in companies like Apple or Tesla.
So why don’t some investors just buy Bitcoin? For many, cryptocurrencies still seem risky. Owning Bitcoin requires having a Bitcoin wallet and trusting cryptocurrency exchanges. Moreover, investors need to understand how to securely store their private keys and how to calculate capital gains tax.
With Bitcoin ETF, these issues disappear. Investors don’t have to worry about private keys, storage, or security. They own shares in the ETF just like their stocks and can gain experience in the cryptocurrency market without going through the complicated process of buying and storing crypto.
This is not a new idea at all. Many investors have been keen on creating a Bitcoin ETF for years. In the US, financial institutions like Blackrock, Fidelity, and Invesco have applied to the Securities and Exchange Commission (SEC) for approval of such ETFs – so far without success. In Europe, the situation looks a bit better – the first European Bitcoin ETF was launched in August 2023. by London’s Jacobi Asset Management.
For many, a Bitcoin ETF can bring more traditional legitimacy to cryptocurrencies. It may also result in increased interest in Bitcoin by major financial institutions, benefiting both experienced investors and those just beginning their journey with cryptocurrencies.
Bitcoin ETF has the potential to become a key element of the future of cryptocurrency investment. Offering simplicity and clarity, it may attract a new wave of investors to the world of cryptocurrencies who have so far remained on the sidelines. Only time will tell how this market segment will evolve in the coming years. One thing is certain: cryptocurrencies remain one of the most exciting topics in today’s financial world.
Photo by Kanchanara on Unsplash
