Let’s take a step back and define what a bitcoin ETF is and how it works before we look at the potential benefits and hazards of a bitcoin ETF. An exchange-traded fund (ETF) is a type of investment vehicle that monitors the performance of a specific asset or group of assets. ETFs allow investors to diversify their portfolios without having to hold the assets.
ETFs are a simpler alternative to buying and selling individual assets for those who want to focus just on gains and losses. Traditional ETFs allow investors to readily diversify their holdings since they target larger baskets of names with something in commonfor example, a focus on sustainability or stocks representing the video game industry and related firms.
A bitcoin ETF is a fund that tracks the price of the world’s most popular digital currency. This allows investors to invest in the ETF without having to go through the time-consuming process of trading bitcoin. Furthermore, because the ETF would not be directly invested in bitcoin, holders will not have to worry about the complicated storage and security protocols that cryptocurrency investors must follow.
Is there a bitcoin exchange-traded fund (ETF)?
The first ETF in a category is frequently the one that gains the greatest assets. With Bitcoin ETFs, we’ve seen that the ProShares Bitcoin Strategy ETF (BITO), the first to debut, currently has over a billion dollars in assets. For a new fund, that’s a really quick build up.
However, the VanEck Bitcoin Strategy ETF (XBTF) and the Valkyrie Bitcoin Strategy ETF are now available (BTF). At a high level, they’re all holding Bitcoin futures as a means to watch the price of Bitcoin.
Amplify Transformational Data Sharing ETF (NYSEARCA: BLOK)
Since 2018, the Amplify Transformational Data Sharing ETF has been available on the market. This ETF, unlike most others, does not track an index. It owns stakes in a number of companies involved in the development and implementation of blockchain technologies. Silvergate Capital Corp. (SI), MicroStrategy Incorporated (MSTR), and HIVE Blockchain Technologies are among these firms (HIVE).
This ETF has a 0.70 percent cost ratio and $365 million in assets under management (AUM). It has a 52-week low of $12.79 and a 52-week high of $36.69, with a 52-week low of $12.79 and a 52-week high of $36.69. The Amplify Transformational Data Sharing ETF has a high level of liquidity, with over 270,526 shares traded every day. It pays $0.66 per share in annual dividends. This ETF has a one-year return rate of more than 90%.
Over the previous year, the Amplify Transformational Data Sharing ETF has performed well.
Reality Shares Nasdaq NexGen Economy ETF (NASDAQ: BLCN)
Since 2018, the Reality Shares Nasdaq NexGen Economy ETF has been available for purchase. It invests in 73 firms and monitors the Reality Shares Nasdaq Blockchain Economy Index. Galaxy Digital Holdings Ltd. (GLXY), Baidu, Inc. (BIDU), and Micron Technologies are among them (MU).
This ETF has a 0.68 percent cost ratio and $188 million in assets under management. It has a 52-week low of $17.55 and a 52-week high of $41.68, with a 52-week low of $17.55 and a 52-week high of $41.68. Shares of Reality The Nasdaq NexGen Economy ETF pays a $0.31 yearly dividend per share. Every day, it trades over 69,473 shares. The 1-year return rate of this ETF is 58.66 percent.
Over the previous year, the Reality Shares NASDAQ NexGen Economy ETF has performed well.
First Trust Indxx Innovative Transaction & Process ETF (NASDAQ: LEGR)
Since 2018, the First Trust Indxx Innovative Transaction & Process ETF has been trading on the stock exchange. It invests in 100 firms and tracks the Indxx Blockchain Index. Baidu, Inc. (BIDU), Micron Technologies (MU), and Advanced Micro Devices are among them (AMD).
This ETF has an AUM of $54.4 million and an expense ratio of 0.65 percent. Its 52-week low is $18.85, while its 52-week high is $38.09. The yearly dividend yield of the First Trust Indxx Innovative Transaction & Process ETF is $0.36 per share. It has a daily volume of over 3,527 shares. The one-year return rate of this ETF is 17.90%.
Over the previous year, the First Trust Indxx Innovative Transaction & Process ETF has performed well.
Purpose Bitcoin ETF (TSX: BTTC)
Purpose Bitcoin ETF, the world’s first bitcoin ETF, debuted in February 2020 with more than $590 million in assets under management. A 1% management fee is charged on the ETF.
Without the risk of trading at huge premiums to the value of the ETF’s underlying bitcoin holdings, BTTC acquires bitcoin directly and stores it in cold storage. This method allows you to obtain more direct exposure without having to use a wallet on an exchange like Coinbase to purchase and sell bitcoin.
Innovation Shares NextGen Protocol ETF (NYSEARCA: KOIN)
Since 2018, the Innovation Shares NextGen Protocol ETF has been available for trading. It invests in 45 startups and maintains the Innovation Labs Blockchain Innovators Index. Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA), and Visa Inc. are among these firms (V).
This ETF has a 0.95 percent cost ratio and a market capitalization of $20.6 million. A 52-week low of $20.54 and a 52-week high of $38.34 have been recorded. Shares of Innovation The yearly dividend yield of the NextGen Protocol ETF is $0.15 per share. Every day, it trades over 19,404 shares. The 1-year return rate of this ETF is 30.85%.
Grayscale Bitcoin Trust (OTCQX: GBTC)
As of October 2021, the Grayscale Bitcoin Trust has a market capitalization of $27.8 billion dollars. The trust is only accessible through a prospectus, and it opens for new funding on a regular basis. Grayscale has also stated that the fund will be converted into an ETF. If you want to invest in this upcoming cryptocurrency ETF, Vanguard and other financial firms can assist you get access once it becomes available. Contact a broker so that you can be notified when GBTC takes on new investors.
The trust has become a popular place for large banks and investment organizations to enhance their exposure to the crypto industry since its launch in 2013. Morgan Stanley has purchased $240 million in GBTC stock, making it the company’s second-largest shareholder behind ARK Invest.
Are bitcoin ETFs a safe investment?
Despite the fact that a futures-based bitcoin ETF isn’t a direct investment in cryptocurrencies, it’s nevertheless dangerous due to bitcoin exposure and the complexities of futures contracts.
Ross is particularly concerned about new investors who have been anticipating the launch of a futures-based bitcoin ETF in order to obtain exposure to the cryptocurrency without fully comprehending its hazards. “Those who may have been waiting and thinking that this was going to make it really safe for them, without actually doing the necessary diligence,” he says, are the ones who should be concerned.
Financial experts advise that you only invest what you can afford to lose, whether you use a futures-based bitcoin ETF or directly invest in cryptocurrencies.
Don’t miss: The Securities and Exchange Commission is ready to enable bitcoin futures ETFs to begin trading – here’s what investors need to know.
What is the Bitcoin Futures ETF?
You don’t own bitcoin directly when you invest in a bitcoin futures ETF, as you would with a stock or bond ETF. Bitcoin futures, on the other hand, are what you own.
Futures contracts are essentially wagers between two investors on the price of an item be it wheat, oil, or bitcoin at a specific point in the future (hence the name). Bitcoin futures contracts, which are traded on the Chicago Mercantile Exchange, normally have a six-month expiration date. As a result, one group of contracts expires each month, and the exchange prepares a new batch that will expire several months later.
Naturally, the price of bitcoin futures contracts can increase above or fall below the current spot price for bitcoin, depending on whether investors believe the cryptocurrency will be worth more or less in six months than it is now. However, as the contract’s expiration date approaches, the price of the contracts should converge with the market price of bitcoin, until they finally coincide on the final day.
The bitcoin ETF operates by purchasing futures contracts with expiration dates within a month or two of the current bitcoin price, which should roughly, but not precisely, mirror the current bitcoin price. As the expiration date approaches, the ETF sells the contracts that are about to expire and buys a new set of contracts that will expire in a month or two effectively “rolling” them over.
This isn’t unusual; several commodity ETFs operate in this manner. The United States Oil Fund (USO), the most popular oil ETF, invests in crude oil futures rather than crude oil. These pricing differences normally don’t amount to much over short periods of time – think days or weeks. They can, however, become important over longer periods of time, such as six months or a year, according to Hougan.
What is the new bitcoin exchange-traded fund (ETF)?
No. You’re investing in an exchange-traded fund (ETF), which is a fund that tracks the performance of another asset. The ETF is actually following a futures contract in this example, which is an agreement to purchase or sell an item in the future at a specified price, and the asset is Bitcoin.
Is it wise to invest in Blockchain ETFs?
One of the trendiest sectors in 2021 was blockchain. These ETFs are the most effective approach to profit from the expanding trend. One of the best-performing market sectors in 2021 was blockchain.