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- Bitcoin ETFs are a type of asset that mimic the price movements of Bitcoin
- While using Bitcoin ETFs, you do not have to own the digital currency directly to trade it
- To understand the Bitcoin ETF meaning, it is very important to know the differences between Bitcoin ETFs and regular trading
- While there are many jurisdictions where Bitcoin ETFs are approved, the US has still not approved it
How Does A Bitcoin ETF Work?
Bitcoin ETF meaning: Bitcoin ETFs mimic the price movements of the digital currency
In the world of investment, as of now, two of the hottest topics that everyone is talking about are cryptocurrency trading and exchange-traded funds, simply known as ETFs. It should not come as a surprise that at some point over the past few years, these two markets met each other and created a market that is more exciting, and offers a lot of opportunities to investors.
But what is a Bitcoin ETF and why do they matter? A Bitcoin ETF, in simple terms, is basically an asset that mimics the price of the cryptocurrency. This allows traders to buy into the ETF without the need to trade Bitcoin itself. This can make trading Bitcoin a lot easier for investors around the world.
When you are trading Bitcoin on its own, you are most likely to use an exchange or trading platform that offers you access to Bitcoin. While doing so, you will also need a wallet where you will be holding all of your cryptocurrencies.
However, thanks to ETF trading, there is no need to hold the actual cryptocurrencies, which means that you can earn profits and take advantage of the market's high volatility without the need to worry about where to keep your cryptocurrencies.
Bitcoin ETF vs Regular BTC
If you want to know how to invest in a Bitcoin ETF, understanding the difference between trading Bitcoin ETF and regular Bitcoin is very important. The differences between these two are very easy to identify. Let’s start by discussing regular Bitcoin trading.
When you decide that you want to invest in Bitcoin, you are most likely to download one of the crypto exchanges available in the market. Using these crypto exchanges, you can buy, sell, and store cryptocurrencies. Depending on your trading style and strategy, you can either hold Bitcoin in your wallet for a long period of time and wait for its price to increase, or sell it quickly to make profits in the short term.
This type of investing in the crypto market is very popular as well as very easy. However, there are some people who want to trade cryptocurrencies without the need to worry about storing cryptos.
One of the best options that these traders have is using ETFs. When you are trading crypto using ETF, you have the ability to make profits without directly holding crypto. Bitcoin exchange-traded funds are in fact a very popular way to invest in Bitcoin.
ETF is an investment option for traders which is used to track the performance of a certain asset, or even a group of assets. This asset allows traders to diversify their investments without the need of owning the asset directly.
If you are a trader who simply wants a way to only focus on gains and losses, ETFs are able to provide you with a simpler alternative to buying and selling the actual asset individually. Bitcoin ETF, in particular, is an ETF that tracks the performance of Bitcoin.
Thanks to the cryptocurrency ETF, you do not have to worry about going through the complicated process of trading Bitcoin itself. This is one of the biggest differences between Bitcoin ETF vs Bitcoin trading.
Where Are BTC ETFs Approved?
The conversation about ETFs being approved by official regulatory agencies around the world has been ongoing for some time now. Back in 2017, one of the leading crypto exchanges tried to make a Bitcoin ETF approved by the American regulatory agency SEC, however, this turned out to be not successful.
According to the regulatory agency, the main reason behind their decision was the fact that there were a lot of unregulated exchanges where Bitcoin was traded. The regulatory agency said that this was leaving a lot of room for fraud and manipulation.
Discussions around launching a Bitcoin ETF have been ongoing for a long time now in the USA, and although SEC still has not granted authorization for Bitcoin ETFs, there still are many people who show interest in them.
In June 2021, the Securities and Exchange Commission of the United States announced that it had once again delayed a decision on approving the first Bitcoin ETF. Because of this, there are no approved Bitcoin ETFs in the United States. On the other hand, several such crypto products have already been approved in Europe and Canada.
Europe has led the way in the crypto ETF space, while the SEC is yet to allow such products in the USA. Many people are wondering if there is a Bitcoin ETF available in Europe, and the answer to this question is yes. In fact, there are many local traders who are using this asset in the region. Several regulators in the region, including FINMA, Swiss regulator, have approved this asset.
Many are critical of the steps taken by the US regulator. As there are many investors who want to use Bitcoin ETFs in the USA, the current steps taken by the SEC are limiting the access of crypto traders to an asset that is becoming increasingly popular around the world.