What is Spot Bitcoin ETF?
A spot Bitcoin ETF is a type of mutual fund that tracks the price of actual, physical bitcoin. The main idea of this fund is to enable investors to obtain exposure to BTC through a regulated and financially known product (ETF), without having to own an actual bitcoin or create a profile on one of the crypto Currency exchange. Spot Bitcoin ETF would be traded on major exchanges, much like stocks, and could be bought and sold during the exchange’s business day at prices consistent with the price of bitcoin.
Source: cointelegraph
How does Spot Bitcoin ETF work?
Spot Bitcoin ETF is an investment fund that buys and sells real bitcoins in the market. It aims to track the price of bitcoin as closely as possible, so that the value of one share in the fund corresponds to the value of one bitcoin. Spot Bitcoin ETF works by having a storage service provider, which is responsible for the secure storage and protection of bitcoins that the fund owns. The custodial service provider also issues and redeems shares in the fund, which can be bought or sold by anyone who has access to the exchange on which the fund is traded. When someone wants to buy a stake in the fund, they have to pay the storage service provider an equivalent amount of money. The custodial service provider then adds these bitcoins to the fund’s portfolio and issues a new stake. Conversely, when someone wants to sell a stake in the fund, the provider of the storage service sells bitcoin, and then pays the user the requested money. Here’s a simple example, Ana wants to invest 10,000 euros in spot Bitcoin ETF. Suppose the price of bitcoin is 50,000 euros, which means that the price of one share in the fund is also 50,000 euros. Ana buys a 0.2 stake of Spot Bitcoin ETF (10,000 euros). The custodian service provider then adds these bitcoins to the fund’s portfolio and issues Ani 0.2 shares in the fund. Ana can now trade her stake in the stock market on which the fund is traded, or keep it as a long-term investment, and she doesn’t need to worry about storing bitcoin, because the fund does it for her.
Source: cointelegraph
Bitcoin ETF in usa
As we noted before, Spot Bitcoin ETF is an investment fund that tracks the price of real, physical bitcoin in the market. In the U.S., there are several types of Bitcoin ETFs, such as ETFs under leverage and Bitcoin Futures ETF. A bitcoin ETF under leverage is a fund that uses leverage to increase its return on investing in bitcoin. This means that investors in the fund can make more money when the price of bitcoin rises, but also lose more money when the price of bitcoin falls. Bitcoin Futures The ETF is a fund that tracks the price of future contracts for bitcoin, which are deals to buy or sell bitcoin at a certain price in the future. These contracts do not transfer ownership of bitcoin and must be settled or exchanged for new contracts as they approach expiration. This means that Futures The ETF doesn’t really trade bitcoin, on the other hand the ETF under leverage is additionally risky. Currently, there are eight applications for Spot Bitcoin ETF in the U.S., submitted by various financial entities, such as BlackRock, Ark Investment Management and Grayscale. However, the SEC has not yet approved any Spot Bitcoin ETF, due to concerns about security, transparency and market manipulation. The SEC has deadlines to make a decision on each application, which can be extended or postponed. Many investors and experts feel that the approval of the Spot Bitcoin ETF would be beneficial for the development and popularization of bitcoin among investors in the traditional world of finance, and that the question is not whether the SEC will approve the Spot ETF, but when it will approve it.
Source: cointelegraph
What if the SEC approves the ETF?
The SEC’s approval of the Spot Bitcoin ETF could have a significant impact on the price of bitcoin and the cryptocurrency market. One of the most frequently mentioned scenarios is that the approval of a Spot Bitcoin ETF would contribute to the rise in the price of bitcoin, as this would attract more investors, especially institutional and retail, who would like to take the opportunity to invest in bitcoin through a regulated financial instrument such as the ETF. This would increase demand for bitcoin and therefore its value. Some analysts predict that the price of bitcoin could reach $100,000 or more if spot Bitcoin ETF is approved. Another assumption is that the approval of spot Bitcoin ETF would lead to a rise in bitcoin liquidity, as this would allow for a greater flow of capital between traditional and crypto markets. This would make buying and selling bitcoin easier, reduce volatility and improve price stability, this has been one of the main criticisms of Bitcoin in the past. It would also allow people who don’t have profiles on crypto exchanges or don’t want to take risks of direct ownership of bitcoin.
Source: cointelegraph
Conclusion
In this blog, we learned what Spot Bitcoin ETF is, how it works, and what is the current situation with Spot Bitcoin ETF in the US. Spot Bitcoin ETF is one of the most important and The most anticipated topics in the world of cryptocurrencies. Many believe that its approval would be a step forward for the development and popularization of bitcoin and others Cryptocurrency. However, there are certainly some challenges and risks to consider. Thank you for reading today’s blog, we hope you enjoyed it. We would love it if you would share your opinion about spot Bitcoin ETF with us on our social networks (Twitter, Instagram). Do you think it is positive for the future and development of Bitcoin, and when you think that approval by the SEC will occur.
