InstaForex

August 18, 2021

Know What A Bitcoin ETF Is & Why It Is Important For The Crypto Market

 Several countries including large institutions have started actively filing ETF applications related to cryptocurrencies, especially Bitcoin (BTC) and Ethereum (ETH). Among the countries that have already approved several Bitcoin ETFs are Canada and Brazil.


The growth of ETFs based on crypto assets is actually to some extent carrying a good sign for the crypto market.


What is a Bitcoin ETF?


ETF or Exchange Traded Fund means Exchange Traded Fund. It is an investment fund that tracks the price of an asset, covering various industries and asset classes.


There are many types of ETFs and one of them is the gold ETF which has been around for decades tracking the price of gold in the market.


Just like gold ETFs, Bitcoin ETFs follow the movement of the Bitcoin price (BTC).


Why are crypto ETFs so important?


Cryptocurrencies and Bitcoin are quite complicated especially involving legislation or investor protection. For example the case between Ripple and the Securities and Exchange Commission (SEC) which has yet to show signs of completion.


This impact has had a huge impact on large institutions such as Goldman Sachs, Grayscale, Global X, and more. Why?



It should be noted that crypto investments among institutions are not the same as individual investors. Institutional groups need a complex legal framework and financial system to join the sector.


The existence of crypto ETFs can expand the potential of investors and the exposure of crypto prices without owning its assets. For example, Bitcoin ETFs can also store assets other than Bitcoin such as Ethereum, Tesla stocks, gold, and more.


Crypto ETFs and SEC


ETFs are regulated financial products since they are traded on conventional markets such as NASDAQ or NYSE rather than on crypto exchange platforms such as Binance, Luno, or Coinbase.


Just what’s been of the draw lately is that many large institutions in the U.S. are racing to file crypto ETFs: Bitcoin, Ethereum, etc. but it’s getting complicated because the SEC has rejected all applications made as of March 2021.


In fact, until now there has been no news of Bitcoin ETFs being approved in the country.


Reasons often raised by the SEC: The crypto market is highly volatile, the Bitcoin market is unregulated, and the ability of crypto assets to manipulate the market.


For now, it is difficult to give accurate expectations as regulators in the country are still loudly debating strict legislation on the crypto sector.


In conclusion, Bitcoin ETFs offer investors the opportunity to gain exposure to Bitcoin with legal compliance conditions.


Because of this, crypto -based ETFs are one of the best ways to further expand the adoption of cryptocurrencies as asset class among institutional investors.