Investors, both individual and institutional, are on the edge of their seats, eagerly anticipating the groundbreaking arrival of a Bitcoin spot ETF in the market.
But have you ever wondered about the thrilling process behind this financial phenomenon? Let's dive in!
Bitcoin ETF, exchange-traded fund, mirrors Bitcoin's price by holding futures contracts or derivatives.
Unlike the traditional hassle of setting up a digital wallet and navigating a crypto exchange, investors can seamlessly trade Bitcoin ETF shares on standard stock exchanges.
These shares are traded same way as other ETF.
The Bitcoin ETF will have a lot of benefits for present holders of Bitcoin and may even foster the next bull run, so any news about BTC ETF always have adverse effects on the market.
Some benefits that come with ETF include
Convenience: The fund are easily secured all you worry about is your positions.
Liquidity: trading shares becomes easy at any time during market hours, without facing delays or high fees.
Diversification: You can add some exposure to bitcoin to your portfolio.
These ETF also comes with risk, some of which are:
Volatility: Bitcoin's wild price swings, can also affect the value of shares.
Premiums and discounts: The price of the ETF may not always match the price of the underlying bitcoin.
Fees and taxes: annual and capital gains tax
So now, let's talk about how the ETF approval works.
These stock exchanges better referred to as tradfi, are the major pushers for mainstream adoption for any financial related market.
The altitude and sentiment of players crypto market present is shifting towards institutional players.
First they are submitted by the sponsor (manager) to the SEC.
When the SEC approves of it, the sponsor begins to acquire the underlying asset, places these assets in a trust, and then uses these assets to form ETF creation units.
But Bitcoin spot ETF are different, see how below;
The SEC under Gary Gensler has remained steadfastly opposed to approving the creation of a spot bitcoin ETF despite increasing pressure from the industry and lawmakers.
Spot ETF are different from trust offerings, though thousands of spot ETF have been approved by SEC, but BTC spot ETF haven't been approved because SEC claims the market is not matured enough, and crypto plagued with fraud and abuse and is very volatile market without protection for investors funds.
Most of these charges have been fronted by Garygensler, but we stand on hopium for better days.
Until next time I bring the crypto news your way again.
Stay SAFU
#ticktalker
Hope you have understood the mechanism behind approvals and functioning of ETF?
