Guide to Investing in Bitcoin Futures ETFs

Last Updated on 3 months by newseditor

In January 2024, the Securities and Exchange Commission approved the direct investments of many Bitcoin exchange-traded funds. This approval can be said to meet the demand from investors looking for an easy way to invest in Bitcoin. The approval of the funds was pretty much certain after an earlier court decision that called into question the SEC’s different method of handling Bitcoin ETFs in comparison to other similar products. Below are more details on how to get started with Bitcoin Futures ETF. 

What Are Bitcoin Futures ETFs?

Bitcoin futures exchange-traded funds (ETFs) are collections of assets linked to Bitcoin that brokerages offer on traditional exchanges for trading as ETFs. Basically, these ETFs aim to provide retail and other investors with exposure to cryptocurrencies without the need to actually own them.

Where Do You Purchase Bitcoin ETFs?

It is as simple as your advisor or broker could help you invest in Bitcoin futures ETFs if they offer them. Also, there are exchanges, including the Nasdaq and the New York Stock Exchange ARCA, that offer a number of bitcoin futures exchange-traded funds such as: 

  • VanEck Bitcoin Strategy ETF (XBTF)
  • Proshares Bitcoin Strategy ETF (BITO)
  • Global X Blockchain & Bitcoin Strategy ETF (BITS)
  • Valkyrie Bitcoin and Ether Strategy ETF (BTF)

Furthermore, investors can also short crypto using ETFs like the ProShares Short Bitcoin ETF (BITI).

Nonetheless, it’s crucial to keep in mind that not all of these ETFs’ holdings are bitcoin futures. How it works is that, when it aligns with the fund’s strategy, they hold bitcoin futures contracts, but otherwise, they invest in traditional equities. 

Pros And Cons Of Bitcoin ETFs

Purchasing a Bitcoin ETF allows an investor to track the price of cryptocurrency without having to deal with cryptocurrency exchanges. It also removes the need to understand how Bitcoin operates or assume the risks associated with holding actual Bitcoin. Bitcoin futures or spot ETFs make the process of investing in Bitcoin much easier to navigate without having to worry about forgetting things like your wallet password.

Additionally, an ETF enables investors to lower risk exposure and diversify their portfolios by combining various securities. Bitcoin futures ETFs are qualified for tax efficiency since the SEC regulates them as they trade on traditional exchanges.

An increasing number of Bitcoin ETFs translates into higher administration costs. However, recently, investors benefited from lower fees as a result of the SEC’s simultaneous approval of many spot Bitcoin ETFs, which sparked competition in issuer pricing. 

Furthermore, another disadvantage is price inaccuracy. An ETF may experience price inaccuracy due to its many holdings, which could be impacted by a spike or fall in the price of bitcoin. Also, an ETF that tracks the price of Bitcoin cannot be swapped for other digital currencies because it is not a cryptocurrency but rather an investment fund.

Takeaways

For investors looking for convenient access to Bitcoin, the SEC’s recent approval of Bitcoin Futures ETFs represents a major milestone. Even while these ETFs provide a more straightforward investing option, it’s important to understand the trade-offs because regulatory control tends to limit some of the benefits that decentralized cryptocurrencies naturally offer.

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