It is exciting news for the crypto community that the chances of the two biggest investment areas are going to merge. Here we are talking about the combination of cryptocurrency with exchange-traded funds or ETFs. Furthermore, the cryptocurrency expert says that opportunities for creating an ETF platform that can track cryptocurrency can change the landscape of both areas.
The Bitcoin platform is showing interest in this new project. However, developers are facing many obstacles in launching Bitcoin ETFs. Hence the project might take a little longer to operate in the real world. For now, let us understand what crypto EFT is and how it can influence the cryptocurrency trading world.
Table of contents
- Understanding the meaning of crypto ETF
- Understanding the workings of crypto ETF
- Impact of ETF in the cryptocurrency trading system
- Provides more convenience
- Offers diversification
- These are more safer
- It makes crypto trading tax efficient
- It is comparatively cheaper:
- Do cryptocurrency ETFs exist in the real world?
Understanding the meaning of crypto ETF
ETF stands for the exchange-traded fund; it is a financial tool that can track the value of a specific asset or group of assets.
Furthermore, it permits investors to multiply their cryptocurrency holdings without actually owning any of the crypto coins. Moreover, these ETFs operate trading over conventional market exchanges in place of cryptocurrency exchanges.
Crypto ETFs having the approval from the SEC will imply that these can receive worldwide adoption soon. Further, the process will make cryptocurrencies legal for the most part. It seems like the best time to take courses on cryptocurrency, learn its works and participate in its evolution.
Understanding the workings of crypto ETF
An ETF is a type of investment driver that assesses the performance of an assortment of assets or just a single asset. Moreover, investors get the chance to diversify their investment with an ETF.
Further, for users who only want to focus on the profit and losses of the platform, ETFs offer them a streamlined option to buy and sell separate assets.
Also, crypto ETF can mimic the value of the majority of prominent digital currencies across the world. Due to this, investors can easily buy currencies without needing to deal with the complex procedures of crypto trading itself.
Moreover, ETF holders do not have direct involvement in the crypto asset themselves. Hence, they will be free from the stress of storage and security protocols that crypto investors usually need to follow. You can clear your concept better by taking a good cryptocurrency trading course.
Impact of ETF in the cryptocurrency trading system
An ETF can bring progressive changes to the cryptocurrency trading system. Here are some areas we can expect to evolve for better:
Provides more convenience
When it comes to cryptocurrency, the greatest benefit ETF provides is that there is no need to handle assets. Though cryptocurrency exchanges make purchasing and selling crypto coins simpler, setting up crypto wallets, private and public keys keeps it from mass adoption. On the other hand, a crypto ETF will let investors start asset trading with their pre-set-up trade accounts.
An ETF has the capacity to store more than one asset. For instance, a bitcoin ETF can contain Facebook stocks, Apple stocks, and others, along with Bitcoin. Hence it enables investors to trade with lower risk and enhances their portfolio.
Simultaneously, performing crypto trades on a regulated market exchange, crypto ETF might offer investors the chance to shape their current equity portfolios for the better.
These are more safer.
Every crypto ETF is highly regulated as the trading process occurs over traditional exchanges. Hence regulators can have the power to screen and inspect the performance of the exchanges. Furthermore, they can also protect the system from price manipulation within the exchange-traded fund markets.
However, the chance of price manipulation of underlying assets can still surface due to the regulated nature of crypto exchanges. In addition to this, crypto wallets and exchanges tend to have a high risk of theft and cyber attacks. Hence crypto ETFs remove these issues as investors don’t actually own cryptos.
It makes crypto trading tax efficient.
As it is known that cryptocurrencies are unregulated and work on decentralization systems, most tax agencies and pension fundings restrict crypto purchases worldwide. While the SEC regulates a crypto ETF as it operates over traditional exchanges, making the trading process suitable for tax efficiency.
It is comparatively cheaper.
The process of purchasing and storing a considerable amount of cryptocurrency is time-consuming. Moreover, it involves multiple complex tasks such as managing multiple crypto wallets, creating profiles on many crypto exchanges, etc. But, with crypto ETF, you are entirely free from these tedious tasks.
Also, investors get better exposure to crypto ETFs just by making one investment. And, when it comes to charges, generally, ETF fees are less than current crypto trading platforms.
Do cryptocurrency ETFs exist in real life?
Currently, there are no cryptocurrency ETFs in actual existence. This is due to the unregulated nature of cryptocurrency and its markets. Further, it makes it easier for well-established investors to cause manipulation in crypto pricing.
The SEC or Securities and Exchange Commission of the United States of America also has pending proposal approvals for crypto ETFs. It is so because the market is entirely unregulated.
Though there are no crypto ETFs, some public-traded funds are making investments in cryptos, like Bitcoin. Unlike a bitcoin ETF where investors can simply buy bitcoins, having shares in fundings represents the number of money investments on the cryptos.
Additionally, investors can use one more technique to get Bitcoin exposure without needing to purchase it. For this, they need to put resources on blockchain and crypto firms, giving you access to cryptocurrency markets.
There is always something innovating going on in the field of cryptocurrency. Though the newfound digital money has been proving its value to the investment world, more progressive changes are still waiting to occur.
Once the ETFs get approval from the SEC, we will experience an explosion of changes in the crypto trading space. By discussing it with the best cryptocurrency advisor, you can get a better understanding of this matter.
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