Cryptocurrency ETF is an investment product that attracts the attention of many people. Cryptocurrency ETFs offer an easy way to invest in the digital currency market without having to own crypto assets directly.
Cryptocurrency ETFs track the performance of one or more digital currencies by investing in a portfolio of related crypto instruments. These crypto assets trade on stock exchanges like other ETF products, and investors can hold them in their standard brokerage accounts.
Cryptocurrency ETFs can track the value of digital currencies by investing in futures contracts for digital currencies, or by investing in digital currencies directly.
Thus, investors can gain exposure to digital currency prices without having to transact on crypto exchanges or face the costs and complexities associated with owning digital assets directly. However, cryptocurrency ETFs can be more expensive than other ETFs.
What is a Cryptocurrency ETF?
Cryptocurrency ETF is an abbreviation for Exchange Traded Fund, which is a fund that is traded on an exchange. Cryptocurrency ETF is a type of fund that contains a number of digital currencies, such as Bitcoin, Ethereum, or others.
Cryptocurrency ETFs aim to imitate the price movements of the digital currency they are based on. For example, Bitcoin ETF is a cryptocurrency ETF that tries to follow the price of Bitcoin, the most valuable digital currency among other digital assets.
Cryptocurrency ETFs allow investors to buy and sell shares on stock exchanges, like other ETF products. Cryptocurrency ETFs differ from mutual funds, which can only be bought or sold at the end of the trading day.
Cryptocurrency ETFs are also different from digital currencies, which must be held in a crypto wallet or crypto platform.
How Do Cryptocurrency ETFs Work?
Cryptocurrency ETFs can work in two ways, namely spot ETFs and futures ETFs. Spot ETFs are cryptocurrency ETFs that directly own digital currencies, and build portfolios that naturally mimic the performance of the digital assets they hold.
Futures ETFs are cryptocurrency ETFs that invest in futures contracts, which are agreements to buy or sell digital currencies at a predetermined date and price. Thus, the price of cryptocurrency ETF shares rises and falls according to the price of the futures contract, not the digital currency itself.
Cryptocurrency ETFs must be registered with the Securities and Exchange Commission (SEC) before they can be traded on stock exchanges. A cryptocurrency ETF must purchase and hold the assets that form the basis of its portfolio, be they digital currencies or futures contracts. Cryptocurrency ETFs also have to pay management fees, transaction fees, and taxes associated with their products.
What Are the Benefits of Cryptocurrency ETFs?
Cryptocurrency ETFs have several advantages, both for investors and the digital currency market, including:
Improve accessibility
Cryptocurrency ETFs make it easy for investors to invest in the digital currency market without having to own or store crypto assets directly. Cryptocurrency ETFs can be bought and sold on stock exchanges using a standard brokerage account, without having to register on a crypto exchange or create a crypto wallet.
Reduce costs
Cryptocurrency ETFs reduce the costs typically incurred for owning or transacting with crypto assets, such as wallet fees, exchange fees, network fees, and mining fees.
Cryptocurrency ETFs also offer lower expense ratios and less brokerage commissions than purchasing individual cryptocurrencies.
Increase liquidity
Cryptocurrency ETFs increase the liquidity of the digital currency market by attracting more investors and capital into it. Cryptocurrency ETFs also allow investors to buy and sell shares at any time during trading hours, without having to wait for sellers or buyers of crypto assets.
Cryptocurrency ETFs also reduce liquidity risks associated with price fluctuations of crypto assets.
Increase diversification
Cryptocurrency ETFs increase the diversification of investors' portfolios by providing exposure to various types of digital currencies across various sectors and markets.
Cryptocurrency ETFs also allow investors to combine other ETF products, such as stocks, bonds, commodities, or mutual funds, to create a balanced portfolio that suits their risk profile and investment objectives.
What Are the Challenges of Cryptocurrency ETFs?
Cryptocurrency ETFs also have several challenges to face, including:
Regulations
Cryptocurrency ETFs still face regulatory hurdles, especially in the United States, which does not yet allow spot ETFs that invest directly in digital currencies. The SEC remains concerned about investor risks, such as price volatility, market manipulation, asset security, and money laundering.
The SEC recently only approved futures ETFs that invest in Bitcoin futures contracts, not Bitcoin itself. Futures ETFs also have their own risks, such as rollover fees, premiums or discounts, and price divergence.
Adoption
Cryptocurrency ETFs still require broader education and outreach to investors, especially those who are not yet familiar with the concept of digital currency and blockchain technology. Cryptocurrency ETFs must also offer added value and greater trust to investors, so that they are willing to participate in these products.
Cryptocurrency ETFs also have to compete with other digital currency investment products, such as crypto mutual funds, crypto trusts, or crypto platforms.
Technology
Cryptocurrency ETFs still face technical challenges, such as scalability, interoperability, security, and standardization. Cryptocurrency ETFs must use blockchain technology that is capable of handling large transaction volumes, interacting with other blockchains, protecting data and assets from cyberattacks, and adhering to industry-agreed standards.
Apa Contoh Cryptocurrency ETF?
Cryptocurrency ETFs have begun to be implemented in several countries, such as Canada, Brazil, Switzerland, and others. Some examples of cryptocurrency ETFs are:
Purpose Bitcoin ETF (BTCC)
Purpose Bitcoin ETF is the world's first cryptocurrency ETF to invest directly in Bitcoin. The Purpose Bitcoin ETF launched in Canada in February 2021, and is managed by Purpose Investments.
The Purpose Bitcoin ETF has assets under management (AUM) of 1.3 billion Canadian dollars as of January 2022, and trades on the Toronto Stock Exchange under the ticker BTCC.
ProShares Bitcoin Strategy ETF (BITO)
ProShares Bitcoin Strategy ETF is the first cryptocurrency ETF in the United States to invest in Bitcoin futures contracts. The ProShares Bitcoin Strategy ETF was launched in October 2021, and is managed by ProShares.
The ProShares Bitcoin Strategy ETF has an AUM of US$1.2 billion as of January 2022, and trades on the New York Stock Exchange under the code BITO.
21Shares Crypto Basket Index ETP (HODL)
21Shares Crypto Basket Index ETP is a cryptocurrency ETF that invests directly in the five largest digital currencies, namely Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and XRP. The 21Shares Crypto Basket Index ETP was launched in November 2018 and is managed by 21Shares.
How To Buy Crypto With Bittime
You can buy and sell crypto assets in an easy and safe way via Bittime . Bittime is one of the best crypto applications in Indonesia which is officially registered with Bappbeti.
To be able to buy crypto assets on Bittime , make sure you have registered and completed identity verification. Apart from that, also make sure that you have sufficient balance by depositing some funds into your wallet . For your information, the minimum purchase of assets on Bittime is IDR 10,000. After that, you can purchase crypto assets in the application.
Monitor price chart movements of Bitcoin (BTC) , Ethereum (ETH ), Solana (SOL) and other cryptos to find out today's crypto market trends in real-time on Bittime.
Read also:
What Are Cryptocurrency Pairs?
What Is Fiat-Pegged Cryptocurrency?
Understanding Ledgers in Cryptocurrency
DISCLAIMER: This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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