Confidence in cryptocurrency is growing! We are seeing this as cryptocurrencies make their way into traditional finance. An excellent example is the growth of cryptocurrency ETFs: 72 ETFs are currently awaiting approval from the U.S. Securities and Exchange Commission. But what is an ETF and how does it differ from actual cryptocurrencies?
What is a cryptocurrency ETF?
In conventional finance, an exchange-traded fund (ETF) holds assets from different companies. Basically, it is a ready-made portfolio. It can include things like stocks, oil, gold, and even coffee. For example, a gold ETF is a fund that invests in gold bars and tracks the performance of the gold price. Similarly, cryptocurrency ETFs are funds that invest in crypto assets and track the price of the coins linked to them. Like other funds, cryptocurrency ETFs are traded on regular stock exchanges, making it easier for almost anyone to invest in cryptocurrencies without needing to understand all the nuances. The fund manages a portfolio of crypto assets and you can easily buy shares - for example, directly from your bank's app.
Types of cryptocurrency ETFs
There are two main types of cryptocurrency ETFs:
Spot cryptocurrency ETF: Actually holds the cryptocurrency itself (for example, holding Bitcoin directly).
Futures Cryptocurrency ETF: Tracks the price of cryptocurrency futures contracts (buy/sell agreements at a future date), not the actual cryptocurrency.
Remember that when you buy a share of a cryptocurrency ETF, you do not own the cryptocurrency!
What's next?
Cryptocurrency ETFs are heating up! This increase in interest shows a growing demand for cryptocurrencies and a desire among everyday investors for more accessible tools to engage with innovative digital assets. Currently, the leading cryptocurrencies with ETFs are Bitcoin (BTC) and Ethereum (ETH), but others like Litecoin, Solana, and Dogecoin are waiting to follow.
As interest in cryptocurrencies is growing - with ETFs, broader adoption, and innovations - be ready to make the most of it.
