Exchange Traded Funds (ETF) is an investment fund that is traded on stock exchange; instead of physical assets ETFs hold securities such as stocks and bonds. ETF have become one of the most popular investment products or vehicle for investors: individual and institutional. ETF offers investors the benefits of low cost diversification and protection. Investors get a share of a diversified portfolio. It is similar to buying a share in a company.
Bitcoin-based ETFs are being seen as a secure way of investment for potential investors that will influence them to venture on cryptocurrency. It offers opportunities to investors to invest in bitcoin without going through the trouble of using cryptocurrency exchange.
Without taking the risk of owning a bitcoin directly investors can invest in a bitcoin ETF thus providing leverage to the bitcoin price. This is possible without signing up with a cryptocurrency exchange. Bitcoins are to be secured in a wallet and if an investor loses the password to the wallet then the bitcoin is lost forever. A bitcoin ETF makes the task of investing in a bitcoin easy for investors.
There is diversification in bitcoin based ETFs; investors can hold more than one asset. This lessens the chances of risk and diversifies the investor’s portfolio.
ETFs track the price of asset; however, the possibility of inaccuracy cannot be overlooked. Due to multiple holdings to diversify the portfolio, the accurate price of the bitcoin may not be precisely reflected in the exchange traded fund.
Bitcoin can be traded for various other cryptocurrencies. However, a bitcoin ETF is not entitled to trade for other cryptos because it is not a cryptocurrency but an investment fund that tracks the price of bitcoin.
Owning a share in a bitcoin is not the same as owning a bitcoin. By owning a bitcoin ETF, shareholders are not bitcoin owners.
A bitcoin based ETF could be useful and helpful for those who prefer not to take the responsibility of protecting the bitcoin wallet or to safely buy a bitcoin directly.
It is impossible to predict the future value and performance of any asset.
Financial experts are of the opinion that whether you invest in a bitcoin based ETFs or cryptocurrency directly, only invest what you can afford to lose.