Investing in Bitcoin ETFs

The three first bitcoin ETFs (exchange-traded funds) were made readily available within the U.S. in October and November of 2021. The three ETFs are all linked to Bitcoin futures contract and they're not dependent on bitcoin's market price.
Bitcoin spot ETFs been in existence across Canada as well as Europe for many years and there are numerous options for spot ETFs that are available in the U.S., but the Securities and Exchange Commission (SEC) who regulates the financial market is yet to approve these ETFs here.
Read on to find out more about the benefits of an ETF that is based on bitcoin as well as the controversy surrounding the introduction of these funds on the market as well as whether Bitcoin the futures ETFs could be a good fit for your investment plan.

Why a Bitcoin ETF?

To understand the evolution of the initial bitcoin ETFs, it is essential to comprehend the profound transformations that crypto is bringing to the world of finance.
Since the introduction of Bitcoin in 2009 as the first decentralized digital currency the interest of investors in cryptocurrency has only increased. This is no surprise: in just a little over a decade the market has evolved from one cryptocurrency into thousands of tokens, alt coins and blockchain platforms that are set to transform everything from our financial infrastructure to supply chains to art and many more. In December 2021, the market capitalization for all cryptocurrencies was around $3 trillion and there is no sign of slowing.
For some crypto speculators the benefits have outweighed the risks of the highly unstable market. However, for many retail investors investing their money in exchanges and coins which are mostly unregulated has been dangerous.
The purchase of bitcoin, or any other form of cryptocurrency has also brought difficulties for investors who are not based on the book who must acquire new knowledge to be able to carry out even an initial crypto trade beginning with the creation of an online crypto wallet to knowing how to utilize and store private and public keys. As many of our readers know, those who lose private keys that grant an access point to the crypto asset will essentially lose their crypto assets. According to some estimates, as high as 20 percent of bitcoin has been lost because of investors losing these crucial keys.
Therefore, the concept of introducing more traditional investments such as bitcoin ETFs appealed in many ways. The bitcoin ETF provided a means to expose investors to the world's most renowned and largest cryptocurrency, all as well as reducing certain hazards and logistical difficulties of owning and purchasing cryptocurrency. Bitcoin ETFs as well as mutual funds could be traded using traditional brokerage accounts.

Bitcoin ETFs: The History

SEC must approve an ETF in order to be able to be listed on an US exchange. However, to date the SEC has taken a firm stance in opposition to bitcoin as well as other cryptocurrency-related funds due to the fact that bitcoin, since it is unregulated and traded through exchanges that are not regulated, could be vulnerable to manipulation and fraud.
Crypto-entrepreneurs Cameron as well as Tyler Winklevoss, known for their Gemini digital currency exchange (among other things) They they were the initial petitioners to create an bitcoin ETF but the idea was rejected due to the potential vulnerability of bitcoin. In its denial in 2017 of the petition in 2017, the SEC said: "Based on the record before it, the Commission believes that the significant markets for bitcoin are unregulated." 

Cryptocurrency as a currency, security or commodity?

The acceptance of crypto-related money was further hindered by a debate about what classification cryptocurrencies should have -- a matter which would decide the way in which the market is regulated. While the majority of cryptos are classified as currency however, they aren't commonly utilized as legal tenders to purchase products or services (although this is shifting).
In a press release issued by SEC chairman Gary Gensler in September 2021 Gensler stated that a variety of kinds of cryptos should be considered securities. This has raised questions in the crypto industry over the degree of supervision that would follow, given the fact that security is regulated by SEC.
Bitcoin and Ethereum But, both are both which are considered considered to be commodities. Since commodities are not as tightly controlled as securities -that are subject to regulations on transparency of prices, in addition to more stringent standards for reporting and oversight of market abuseSome firms were able to see this as an opportunity.

The way to approve

While regulators in Canada and a few other countries of Europe are approving a variety of crypto-related mutual funds as well as ETFs over the past several decades, SEC's position in relation to U.S. markets only began to change in 2021, when Chairman Gary Gensler indicated an openness to ETFs that are tied to Bitcoin futures contract, rather than the price at which the cryptocurrency is traded. cryptocurrency.
Since the futures contract is overseen by the Commodity Futures Trading Commission, and are governed by the Investment Company Act of 1940 The SEC looked at this structure as an opportunity to offer investors greater security. The SEC has approved its first Bitcoin ETF in the month of October, 2021. 

Blockchain Technology

Find out detailed information about Blockchain Technology

What Are the First 3 Bitcoin ETFs?

On the 19th of October 2021, 2021 it was announced that the ProShares Bitcoin Strategy ETF(BITO) was the first ETF that offered investors the opportunity to invest in Bitcoin futures. Two additional ETFs launched within a few days of the debut. Within a couple of weeks after ProShares' ETF became publicized and it was followed by the Valkyrie Bitcoin Strategy ETF was launched on Nov. 15, 2021 which was followed by VanEck Bitcoin Strategy ETF (XBTF).
These funds don't directly invest with "physical" bitcoin (i.e. bitcoin assets) however, they invest in cash-settled, shorter-term contracts exchanged through CME. Chicago Mercantile Exchange or CME.

Discussions about bitcoin ETF debate continues

Although there was initially excitement, and an initial surge of interest by investors for the funds, a few organizations are challenging SEC's decision to restrict bitcoin ETFs to derivatives and putting pressure on organization to reconsider the decision regarding Bitcoin spot ETFs.
Lawyers representing one of those applicants Grayscale Bitcoin Trust, claimed that the SEC does not have "no basis for the position that investing in the derivatives market for an asset is acceptable for investors while investing in the asset itself is not."
They also argued that the SEC is required to take similar situations into consideration and that any deviation from this would be "arbitrary and capricious," which means that in order to be fair , the SEC must look at similar investments in the same manner. 

What Are Bitcoin Futures?

Bitcoin futures are comparable to any other futures contract that deals with an asset that is an underlying stock or commodity. It allows investors to speculate on the price of bitcoin in the future. of bitcoin.
Investors can buy monthly cash settlement contracts (rather than bitcoin) via the CME. It is therefore feasible to buy bitcoin futures in the market without having a bitcoin wallet and also to hold onto an asset that is volatile and being subject to possible price volatility. 

The use of bitcoin futures

The trading of bitcoin futures can bring numerous advantages. If you are a bitcoin miner, futures enable them to secure prices that guarantee an income from mining investment regardless of bitcoin's price direction.
Bitcoin investors also have the option of using futures contracts to hedge their positions on the market for spot.
Additionally, since Bitcoin futures contract are subject to the supervision of the Commodity Futures Trading Commission (CFTC) Large institutional investors can now look at this asset as an option in their portfolios. Before this, bitcoin was mostly unregulated, which makes it a risky investment for institutional investors. 

What Other Bitcoin ETFs and Funds Exist?

Investments by investors has poured billions dollars into a expanding array of crypto ETFs and funds that are flourishing throughout Canada in addition to Europe. Although certain funds are of smaller companies In the fourth quarter of 2021, Fidelity was the first asset manager to create the Bitcoin spot ETF on the Toronto exchange.
Alongside crypto-related instruments, you can invest in many other blockchain and crypto-related businesses, such as mining technology and crypto exchange companies. 

Full Overview of Ethereum ETH

The Takeaway

If you're interested in learning more about the cryptocurrency market, but aren't yet prepared to jump in and invest in an ETF, bitcoin may provide a viable alternative. However, as in December 2021 the SEC has denied applications to establish securities that are linked to the spot bitcoin price, and has confined those investments that are related to bitcoin to only the derivatives market.
While investing in a Bitcoin futures ETF differs from investing in the "physical" or spot bitcoin fund, it can provide some benefits. It is important to know the way futures work prior to investing in the funds. To gain a better understanding of the way that bitcoin and other crypto functions it is possible to begin trading as soon as you sign up with an account with SoFi Invest(r) account. It lets you trade ETFs, stocks, and many more.