- October 27, 2021
- Reading time: 2 mins 38 secs
What effect will an exchange trade fund have on Bitcoin?
Since 2017, institutions and organisations have been trying to get a Bitcoin exchange-traded fund (ETF). An ETF is a type of security that can track an asset, index sector or commodity which can be purchased or sold on an exchange. It can be structured to track anything from the price of an individual asset to a myriad collection of securities.
You will have recently heard about a Bitcoin ETF opening but what is a Bitcoin ETF and what effect will this have on the market.
An ‘Exchange Traded Fund’ is a type of security that can track an asset or commodity which can be purchased or sold on an exchange. It can be structured to track anything from the individual price of an asset or a collection of securities.
You will have recently heard about a Bitcoin ETF opening but what is a Bitcoin ETF and what effect will this have on the market.
An ‘Exchange Traded Fund’ is a type of security that can track an asset or commodity which can be purchased or sold on an exchange. It can be structured to track anything from the individual price of an asset or a collection of securities.
Many institutions and organisations have been wanting a Bitcoin ETF since 2017 but the market has been viewed as too volatile and uncertain. Many countries have already adopted a Bitcoin ETF but investors have been waiting for the US to approve one. The first has gotten approved and this has opened the gates for some of the world’s biggest investors into the crypto market safely. For example, Greyscale, who is a trusted authority on digital currency investing and cryptocurrency asset management, are among the applicants.
There are many reasons why an ETF will make it easier for institutions to get involved in Bitcoin, for example, ETFs do not require you to hold any keys. Countless investors have lost their Bitcoin because they have forgotten their keys, or their exchange has been hacked which has resulted in them losing their holdings forever. Without the need for a key, this removes this risk and investors have historically never been the victim of a cybercrime whilst owing an ETF. Therefore, making it simpler and safer, lowers the barriers for investors to get involved.
Many investors are uncomfortable with some of the technology involved and safety aspects of investing in Bitcoin, such as using a digital wallet.
The security that an ETF can provide investors makes it more attractive and allows them to invest in Bitcoin as easily as they can invest in the stock market. Institutions will only invest in what they perceive as ‘safe assets’ and an ETF will become secure enough for them to take that step into cryptos.
There are many more ETFs scheduled for this year, and the ETFs will create a gateway for institutions and funds to diversify their cryptocurrencies safely. In the short term, it is impossible to predict where the price will go, but in the long-term, it will be very positive for the market.
We are expecting a lot of changes to happen with cryptocurrencies, especially around regulation and institutional adoption and as the crypto market are inherently volatile, this will have a knock-on effect on your positions. But the most important thing to remember is to ALWAYS FOLLOW A STRATEGY. Do not let your emotions come into play with trading and investing, especially with cryptocurrencies. You must stick to your strategy and leave your emotions at the door.
At the end of the day, an ETF makes Bitcoin and cryptocurrencies more accessible for investors, which will increase the number of people getting involved, which will increase the price of the coin.
