The United States’ security and exchange commission (SEC) has recently approved a Bitcoin futures ETF application. It is the first time when USA’s financial regulators have approved a cryptocurrency-related assignment. Since the approval, the Proshares Bitcoin futures ETF has been trading on the stock market. Investing in Bitcoin futures allows investors to get direct access to the cryptocurrency market.
WHAT IS AN ETF?
ETF stands for Exchange-traded fund. It is a type of investment fund, much like a mutual fund sold on the stock exchange. ETFs are desirable investments due to their low cost and tradability at ease. BlackRock iShares are the largest ETF issuers in the US with about 35% market share, followed by The Vanguard Group with 28%. The Bitcoin futures ETF was proposed by Proshares and Invesco, which was approved by the SEC.
WHAT DOES A BITCOIN ETF DO?
Bitcoin exchange-traded funds mimic the performance of bitcoin and provide indirect ways for their trading. Crypto coins are often traded at the cryptocurrency exchanges, but the ETFs allow them to be traded at other platforms like stock exchanges. They enable investors to invest in bitcoin without following the conventional way of going through lengthy procedures.
BITCOIN FUTURES ETF IN THE US MARKET
The announcement of a bitcoin ETF regulation by SEC was welcomed wholeheartedly by the crypto enthusiasts. It was considered an achievement in the crypto market. Investors showed interest in the project, and the Proshares Bitcoin futures ETF had the second-biggest trading debut for any ETF. Bitcoin, itself performed well in the past couple of weeks, where it touched $60k. So it has been a hectic week for all the crypto enthusiasts around the globe.
When on one side, investors are cheerful about this new venture, some of them have criticized its virtue. Investors believe that Bitcoin Futures ETFs are not the ideal way to invest in bitcoins if you are planning a long term. The reason is the trading fees or the assent manager’s fund fee. Proshares’ average charge is around $0.95, which can be approximated to $1 annually. However, crypto exchanges have a lower trading fee, and most of them are one-time. So if you are planning to invest in the short-term, then the cost does not impose a threat. But if you are someone who is planning to invest in a long term, let’s say ten years, then you might lose thousands of dollars in the ETF expense ratios. Many investors, therefore, prefer cryptocurrency exchanges to buy bitcoins.
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