What is an ETF? How is the ETF related to the crypto world?
Today, the president will explain it clearly in simple terms for the brothers!
First of all, what exactly is an ETF? Its full name is Exchange-Traded Fund, which is essentially a special type of stock. Products like Bitcoin ETF serve the core purpose of allowing traditional investors to invest in cryptocurrencies indirectly on the stock market without the hassle of registering with crypto exchanges, managing wallets, and private keys.
It is a bridge connecting the traditional financial market (stock market) and the crypto world!
Let’s talk about the inflow and outflow of ETF funds and how much impact it has on the crypto world:
Inflow of funds = massive traditional funds (whether institutional large funds or retail investment money) are 'rushing into' the cryptocurrency market through the bridge of ETFs;
Outflow of funds = these off-market funds are 'withdrawing' from the cryptocurrency market through ETFs.
Let me give you a very straightforward example: If there is a large inflow of funds into the Bitcoin ETF, it means that institutional investors are entering the market, and the demand for Bitcoin will surge instantly, likely causing the price to rise significantly; conversely, if there is a large outflow of funds from the Bitcoin ETF, it indicates that institutional investors are quietly selling off, putting significant pressure on the price to drop!
Some brothers will definitely ask: Since the ETF and the cryptocurrency market are so closely related, why not buy Bitcoin directly instead of buying ETFs? The president gives a straightforward answer: Those who buy ETFs are mostly three types of people - traditional stock market investors, institutional investors pursuing compliance and stability, and financial players who want stable allocations and are afraid of high risks.
In simple terms: those who dare to trade cryptocurrencies directly generally do not buy ETFs; those who buy ETFs are all looking for 'peace of mind, compliance, and low risk', wanting to earn some stable money by following the cryptocurrency market trends.
What's more critical is that ETFs are financial products that are strictly regulated. Their large and continuous inflow of funds is not as simple as just pushing up the price; it also represents the recognition of the investment value of cryptocurrencies by traditional financial institutions and mainstream investors, essentially providing an 'official endorsement' for the cryptocurrency market! This will attract more conservative funds, gradually shifting the crypto market from a niche speculative market to a mainstream investment track!
Today, the discussion about the correlation between ETF and the cryptocurrency market ends here! If brothers have any questions or want to learn more in-depth knowledge, please write it in the comment section! The president will update a new post tomorrow based on everyone's questions!
