There are now many Bitcoin ETFs on the market. In mid-October 2021, the first Bitcoin ETF, called ProShares Bitcoin Strategy ETF, or BITO for short, was listed on the New York Stock Exchange. Investors are celebrating this as the day Bitcoin went mainstream. BITO isn't what it seems. It uses its investors' money to invest in Bitcoin futures, not in real Bitcoin.
So where is the real BTC ETF?
Thesis: A Bitcoin ETF is an exchange-traded fund. Unlike an ETF that tracks a stock market index, this Bitcoin ETF would focus on Bitcoin as an asset. The company that sets up the Bitcoin ETF buys Bitcoin with investors' money, securitises it and trades it as a security on the stock exchange. The value of the Bitcoin ETF thus develops in line with the value of the deposited Bitcoin. With a Bitcoin ETF, you could invest in Bitcoin on a traditional exchange. You don't have to worry about crypto exchanges or storing your Bitcoin. You only own shares in the fund, which covers the risks of Bitcoin storage.
However, different countries have different rules, so they don't all work the same way: To date, an ETF backed only by Bitcoin only exists in theory. In Germany, an ETF must contain at least five different assets before it is approved as an exchange-traded fund. The US Securities and Exchange Commission (SEC) has also consistently rejected applications for the approval of ETFs with only one asset. Only in Canada, ETFs backed by Bitcoin have been permitted since 2021. Additionally: ETFs have one thing in common: there are ongoing costs that you bear as an investor. Depending on the product they are often between 0.5 and 1 percent per year, sometimes even up to 2 percent. If, on the other hand, you invest directly in Bitcoin, these costs shouldn’t appear as there are pretty fair exchanges as BINANCE!🤫
The most important facts in brief review:
A Bitcoin ETF is an exchange-traded fund that can hold different securities: Real Bitcoin, derivative securities or stocks from the crypto industry.
Because ETFs are traded on traditional exchanges, the storage and security problems that could arise on a crypto exchange are eliminated. But when did you experience security problems on BINANCE? So are you willing to pay up to 2% for something without real security advantages?
In Germany (i.e.) and many other countries, ETFs that only contain Bitcoin are not authorised. An ETF must always contain several different securities. Based on this, an ETF cannot outperform the benchmark, i.e. its reference index (Bitcoin!) as it is mixed with other "securities"
Investing into ETFs doesn’t pose true ownership. Not your keys – Not your coin!
If anything goes "wrong", the laws of the ETF issuing/approving country apply, not the laws of your country. Might become tricky, time consuming and expensive to employ international lawyers
Conclusion on buying Bitcoin vs. the ETF investment
The decision between a Bitcoin ETF and buying BTC directly depends on individual preferences, risk tolerance and investment goals. BTC ETFs offer traditional investors a convenient and regulated entry into the crypto market without the complexity of direct ownership.
The efficient way: Buying BTC directly appeals to those who value the principles of decentralisation, true ownership and control over their digital assets. Paired with cheap fees and easy handling in here, most of the BINANCE square readers know anyway where to get the best deal! 😁💵
Cheers crypto pioneers!
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1. Not a financial advice! My opinion, my experience, analysis/research.
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