In essence, Bitcoin ETF combines a traditional investment tool, ETF, with the most popular crypto asset: Bitcoin. This creates a simple and legally compatible way of investing or trading in the price of bitcoins, available in markets that investors are already familiar with.
An exchange traded fund (ETF) is an investment that can be easily traded on the stock market. Instead of directly owning a particular stock, commodity, or security, investors can buy and hold an ETF that tracks the price of an asset. The Bitcoin ETF will track the price of Bitcoin so that people who wish to speculate on the price of Bitcoin can do so without actually owning Bitcoin themselves.
So why don't people buy Bitcoin themselves? For most major investors and traders, bitcoins and cryptocurrencies in general are still very risky. In addition to having unclear rules, owning bitcoins requires bitcoin wallet and crypto asset exchanges; and this is still uncharted and frightening territory for people unfamiliar with crypto space. Thanks to ETFs, storage and overall security can be managed by a trusted party, not by the investors themselves.
What is Bitcoin ETF?
In essence, Bitcoin ETF combines a traditional investment tool, ETF, with the most popular crypto asset: Bitcoin. This creates a simple and legally compatible way of investing or trading in the price of bitcoins, available in markets that investors are already familiar with.
Who invented the Bitcoin ETF?
A Bitcoin ETF is just a regular ETF with a trackable underlying asset like Bitcoin, which is why no one came up with the concept. However, the first application for a Bitcoin ETF was filed with the Securities and Exchange Commission (SEC) by the Winklevoss Bitcoin Foundation in 2013, and the U.S. Patent and Trademark Office awarded Winklevoss a patent for “exchange products.”
Did you know?
The SEC has rejected a total of nine Bitcoin ETF offers over the past six years.
Short story
July 2013 - The first Bitcoin ETF offer was submitted by the Winklevoss Bitcoin Trust.
June 2018 – The SEC rejected the second Bitcoin ETF offer from Winklevoss.
October 2019 - Bitwise becomes the latest project to have a Bitcoin ETF project rejected by the SEC.
What is so special about this?
Bitcoin ETF brings accessibility and, more importantly, money from the traditional world of investing in the world of crypto assets. This creates a reliable bridge for major and institutional investors who bet on bitcoins. Bitcoin ETF offers continue to be offered and forwarded to the SEC, despite the fact that they have been rejected over the past six years, because one approval can open the gateway to new investments in the crypto space.
Did you know?
Cannabis or marijuana ETFs have become popular for many reasons why Bitcoin ETFs are likely to become popular. Like crypto, the marijuana industry is seen as risky and uncertain for traditional investors who still want to profit from it.
What other differences?
Bitcoin ETFs are expected to bring a new level of trust and recognition. In essence, SEC approval means that institutional investors will be able to trade and invest in Bitcoin. It also means that Bitcoin joins the rest of the securities market and can be easily exchanged for Tesla shares, US bonds, gold, oil or any other traditional asset.
How is Bitcoin ETF produced?
The firm that manages the ETF will need to keep bitcoin for its customers. Investors who buy Bitcoin ETF stocks will indirectly hold these bitcoins. The price of each ETF will rise and fall depending on the activity of buying and selling throughout the day.
Future
Although Bitcoin is still seen by many as a grim, risky, and very risky investment, times are changing. Since its inception over 10 years ago, Bitcoin has received increasing recognition and support from respected entrepreneurs, investors, politicians and regulators. At a recent Congressional hearing on the upcoming Libra cryptocurrency Facebook project, many politicians praised Bitcoin and blockchain technology in general.
There is an opinion among the crypto community that it will only be a matter of time before this general acceptance goes into a fully approved Bitcoin ETF. Due to the fact that soon a new deadline for SEC decision-making will come and there will be more ETFs in the queue, approval will never happen or will be inevitable. Bitcoin holders hope for the latter.