Bitcoin ETF launches, here's what investors need to know - The Average Joe

    Bitcoin ETF launches, here’s what investors need to know

    Victor Lei — Head of Research

    October 19, 2021

    bitcoin ETF

    October 19, 2021

    Today, the first Bitcoin exchange-traded fund (ETF) — ProShares Bitcoin Strategy ETF (NYSE:BITO) — is expected to start trading but here’s why investing directly in Bitcoin is still better for returns…

    What’s the big deal? A bitcoin ETF makes it easier to get exposure to Bitcoin without directly holding it or opening a crypto trading account.

    • Since 2017, funds have failed to get approval for a Bitcoin ETF from US regulators.
    • In October, Bitcoin is up 30% from recent developments and the anticipated ETF launch.

    Bitcoin and Ethereum ETFs are available in Canada, and Solano and Cardano ETFs are available in Europe — as the US catches up…

    The misconception: These new US Bitcoin ETFs won’t actually hold Bitcoin. Instead, they invest in “futures” — a type of financial security that bets on the price of an asset.

    Using financial wizardry, these futures replicate the price movement of Bitcoin.

    • The pros: Minimize the risk of your account getting hacked and losing your Bitcoin.
    • The cons: Costs an extra 5-10% — the futures cost — which would be avoided with a direct Bitcoin investment.

    According to the CEO of data and analytics firm, Token Metrics (via CNBC):

    • This marks the biggest endorsement from the SEC — the police of the stock market.
    • “This will be a floodgate of new capital and new people into the space.”

    What happens next? Funds will be trying to launch ETFs investing directly in Bitcoin — and ETFs for other cryptos (i.e. Ethereum, Cardano, Solana) may not be too far away. Be on the watch for a potential pullback.

    Investors, ask yourself: Is Bitcoin’s upside already priced in or can we expect more?

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