What is an ETF?
An ETF, or Exchange-Traded Fund, is a financial product that bundles a series of assets into a single fund. It trades on an exchange and can be bought and sold throughout the trading day, just like a stock. For example, the IBEX35 is the most popular ETF in Spain as it combines the stocks of the 35 most liquid companies in the country. In the case of Bitcoin, it is even simpler, as with a Bitcoin ETF, one could purchase shares of Bitcoin on exchanges or platforms that offer it. ETFs have gained tremendous popularity in recent years due to their flexibility, providing access to various markets, and offering cost savings in terms of fees. Investors are also attracted to ETFs because they provide an easy way to diversify their portfolios.
To give you an idea of the magnitude and potential of ETFs, the first ETF was launched in 1993, and since then, this sector has moved around $10 trillion annually.
Why is the Bitcoin ETF so important?
Well, if a financial entity wants to offer an ETF, it needs to have a backing. This means that if they want to launch a Bitcoin ETF, the entity must have a sufficient amount of Bitcoin in their possession to back it up. If this Bitcoin ETF gets approved, it would be accessible to millions of investors who would then consider this safer way of investing in Bitcoin for the short, medium, or long term since it would have backing.
What doubts have arisen in recent days?
The SEC is the American regulatory body that approves or rejects the Bitcoin ETF, and they could provide a response regarding the applications submitted for this ETF on that date. However, it’s also possible that they may extend the decision-making process for several more days or even months, as they have the authority to do so.
Difference between a spot etf and an etf future
A spot ETF, also known as a spot ETF, is an exchange-traded fund that tracks the performance of an underlying index, such as the S&P 500. This type of ETF is traded in real-time in the market, and its price directly reflects the value of the underlying assets. Investors can buy or sell shares of a spot ETF at any time during market trading hours.
On the other hand, an ETF future is a financial contract that establishes an agreement to buy or sell an ETF at a predetermined price on a specific future date. ETF futures are traded on derivative markets and allow investors to speculate on the future price of an ETF without owning the underlying assets. These contracts typically have set expiration dates in the future and can be settled before the expiration date.
The main difference between a spot ETF and an ETF future lies in how they are traded and their pricing structure.If an investment fund decides to issue a Bitcoin spot ETF, it means that the fund will acquire an equivalent amount of Bitcoin to back the value of the ETF shares. This means that the investment fund will physically hold the necessary Bitcoin in its portfolio to back each issued share.
The issuance of a spot ETF implies that investors purchasing ETF shares will be acquiring a proportionate ownership of the Bitcoin backing the fund. As the price of Bitcoin fluctuates in the market, the value of the spot ETF will also be affected.
Furthermore, the issuance of a spot ETF means that investors can buy and sell ETF shares in real-time during market trading hours, just like they would with an individual stock. This provides investors with greater flexibility and liquidity, as they can enter and exit their positions in the spot ETF according to their needs and investment strategies.
It’s important to note that the issuance of a spot ETF also requires secure custody of the backed Bitcoin. The investment fund will need to utilize reliable custody services to ensure the safety of the underlying assets.
In conclusion, a big advantage of ETFs is in the bottom line, as they reduce costs.
Administrative fees in most ETFs are typically much lower than in mutual funds, which means the potential for better performance. Therefore, certain risks can be mitigated with an ETF due to the diversification offered by investing in one, so that if one sector or asset is not performing well, other investments can offset any potential losses. When creating an investment portfolio, it is important to take into account the impact of risk and large funds such as BlackRock will let their clients know this.
IMPORTANT; just because blackrock accepts the ETF, does not mean that it has to enter the market to buy BTC indiscriminately, it must first offer it and see the interest rate and sales that it has, depending on all the clients that want BTC, blackrock will buy the relevant BTC to provide collateral for the product, never before.