Bitcoin Futures ETF: Definition, How It Works, and How to Invest

You are responsible for establishing and maintaining allocations among assets within your Plan. See our Investment Plans Terms and Conditions and Sponsored Content and Conflicts of Interest Disclosure. There is also the question of whether a bitcoin futures ETF is able to accurately track the market price for bitcoin over time. This is due to what is called contango, which occurs when a spot price (current market value) is lower than the value of a futures contract for an asset (or backwardation, where the opposite is true). Some analysts believe that this could create lower returns for investors who opt for https://www.xcritical.com/ a bitcoin futures ETF and not bitcoin the asset. Thematic cryptocurrency ETFs currently exist, but these funds do not hold crypto futures contracts nor do they hold crypto assets directly.

What’s the difference between spot Bitcoin ETFs and Bitcoin futures ETFs?

Wall Street would become an intermediary between investors and cryptocurrency in the case of ETFs. So, ETF would not provide what is crypto etf investors with the same anonymity that crypto does, one of the big draws for many crypto investors. Small investors on many trading platforms buying Bitcoin sometimes must pay fees and spreads that exceed 1% of their purchase.

Trading Bitcoin ETFs with CAPEX.com

• A futures ETF uses derivatives such as futures contracts to track the performance of an index or asset class.
• Bitcoin ETFs may also make it easier to short bitcoin or bet on the price of bitcoin declining in value over time.
• Futures contracts agree to buy or sell Bitcoin at a prearranged date and price based on the expected future price movements of Bitcoin.
• The introduction of Bitcoin ETFs could inject much-needed momentum into the beleaguered asset class, which experienced a significant reduction in total value locked across various DeFi blockchains.
• Launched in 2009 by Satoshi Nakamoto, Bitcoin operates on a peer-to-peer network underpinned by the proof-of-work consensus mechanism.
• ETFs are pooled investments, like a mutual fund, but that trade on stock exchanges like a stock or bond and that track a specific index, sector or asset class such as gold.

For taxation purposes, crypto ETFs are not treated the same as other blockchain-based assets because they are traditional assets traded in traditional markets. As an example, Grayscale allows sophisticated investors to trade their assets for the same portion of crypto ETF shares, but these shares have a cliff as well as a vesting period. In most cases, ETFs won’t allow the investors to trade in their assets for the underlying crypto asset either. An ETF is an investment fund that invests in a basket of assets or securities and is listed on a stock exchange. Typically, ETFs track or aim to outperform an index, sector, commodity, or other asset.

Who can invest in a Bitcoin ETF?

This means that the fund holds futures contracts for bitcoin assets, and not bitcoin itself. A futures contract is a formal agreement to purchase an asset at a future date, or in this case, an IOU for the future purchase of bitcoin. That said, there are nuances to the first bitcoin ETF, and investing in a bitcoin futures ETF is not the same as investing directly in bitcoin as a crypto asset.

What is the ProShares Bitcoin Strategy ETF?

Rebate rates currently vary from $0.06-$0.18 per contract depending on the date of enrollment and number of referrals you make. The exact rebate will also depend on the specifics of each transaction and will be previewed for you prior to submitting each trade. This rebate will be deducted from your cost to place the trade and will be reflected on your trade confirmation. To learn more, see our Public’s Fee Schedule, Order Flow Rebate FAQ, and Order Flow Rebate Program Terms & Conditions. “We thought that maybe Bitcoin was a competitor to gold, but it has actually run up the leaderboard, and now it’s starting to nip at the heels of the S&P 500 Index ETFs,” MicroStrategy CEO Michael Saylor said at the time.

Why are bitcoin ETFs so important?

Considering the hoops you have to jump through to own bitcoin—exchange accounts, digital wallets, private keys, network transfers, etc.—a spot bitcoin ETF is one of the easiest ways to add bitcoin exposure to your portfolio. Bitcoin has been one of the best-performing assets over the last decade, rising from a relatively obscure peer-to-peer payment network to a global phenomenon. As the original cryptocurrency, bitcoin has spurred an entirely new asset class that now has over $1 trillion in market capitalization. To choose the right Bitcoin ETF, research reputable providers with a track record of compliance and reliability. Consider fees and regulatory compliance and how well the ETF tracks the performance of Bitcoin before making a choice. Bitcoin ETFs track the price of Bitcoin, while traditional ETFs track indexes of stocks, bonds, or commodities.

Cryptocurrency exchange-traded funds explained

When investors buy shares in a spot Bitcoin ETF, they are effectively buying a share of the actual Bitcoin that the ETF holds. Another advantage of crypto ETFs is that they come from regulated firms and are traded on regulated avenues. Therefore, non-crypto investors can put their money in them with much more confidence, knowing everything is continuously monitored.

Spot Bitcoin ETFs: Pros And Cons

The SEC then reasoned that manipulation in spot Bitcoin markets would similarly impact CME Bitcoin futures prices. A Bitcoin ETF is managed by an investment firm and listed on a traditional stock exchange. Introducing a Bitcoin ETF could draw the attention of regulators to Bitcoin and the wider cryptocurrency market. As Bitcoin ETFs would be regulated financial products, they could prompt regulators to establish clearer guidelines or rules for the cryptocurrency market, which could have far-reaching consequences for Bitcoin investors and users.

A bitcoin ETF is a fund designed to track the performance of bitcoin over time. There are similar ETFs that track assets like gold, silver, and the total stock market index. The first ETF launched in 1993, and they became popular as a way for retail investors to invest in a basket of assets at once.

Cryptocurrency ETFs mask the hassle of buying, selling and storing virtual currencies. They also eliminate the need to learn the technology behind blockchain-based assets. Generally, a crypto ETF simplifies investors’ indirect entry into the crypto ecosystem. What makes crypto ETFs such a powerful and desirable financial tool for investors?

In contrast, the direct buying and selling of crypto often occurs in unregulated environments in certain jurisdictions, where uncertainties persist regarding how to address bad actors in the crypto space due to its nascent stage. In Singapore, cryptocurrencies may be categorised as digital payment tokens (“DPTs”) if they exhibit certain characteristics subject to regulation under the Payment Services Act 2019 (“PSA”). Additionally, if a crypto asset displays characteristics of being a capital markets product, including securities, it would also fall under the regulatory purview of the Securities and Futures Act 2001 (“SFA”). However, aside from these regulations, there is relatively little legislation governing cryptocurrencies in Singapore. Beyond this, an approved spot Bitcoin ETF would bolster liquidity in the Bitcoin market, potentially influencing its price dynamics positively and fostering price stability. Additionally, the approval would broaden investment avenues, especially for retail investors, enabling them to access the Bitcoin market indirectly, circumventing restrictions in countries where direct Bitcoin purchases are prohibited.

With a few hundred million in assets, BTCO is gathering support that could cement it as one of the few 100% Bitcoin funds that might have staying power. That presumes that investors who recently piled in because of the fee waiver don’t bolt if the waiver expires this summer. The iShares Bitcoin Trust ETF is one of the emerging leaders after January’s regulatory moves, thanks to a surge of shareholder money inflow. That’s in part because sponsor BlackRock is waiving a portion of fees for the first 12 months to attract new investors.

However, the long-awaited U.S. spot Bitcoin ETF approval was only recently granted by the U.S. There is now strong potential for this new investment vehicle to become the go-to for mainstream cryptocurrency investments due to its simplicity and accessibility. In fact, in a 2022 Nasdaq survey of 500 financial advisors, 72% said they would be more likely to invest in crypto if a spot ETF product were offered in the U.S. Only time will tell if the spot Bitcoin ETF hits the lofty heights projected by the survey and perceived investor appetite. Spot Bitcoin ETFs represent a significant evolution in cryptocurrency, offering a regulated and simplified way to gain exposure to Bitcoin’s prices. By potentially enhancing market liquidity, aiding in better price discovery, and attracting more institutional participation, spot bitcoin ETFs could play a pivotal role in stabilizing and boosting Bitcoin adoption.