An ETF (exchange-traded fund) is a fund that is traded on an exchange.It buys some assets, forms a portfolio, and then sells you its shares, which are essentially parts of its portfolio. That is, you are indirectly investing in the same assets as the fund.Investor → fund → different assets
Benefits of ETFs
ETFs allow you to invest in several assets or companies at once. For example, you can skip the intricacies of various tech companies and just buy ETH, which is tied to the nasdaq index. It already includes the 100 largest US companies in the non-financial sector.It also cuts down on commissions: you’re only buying 1 share of the fund, not 100 individual shares. Buying an ETF simplifies reporting to the IRS and other regulatory agencies.
This is a fund that will invest in one or more cryptocurrencies and sell its shares on an exchange. That is, it will give clients access to cryptocurrency investments without directly buying crypto.So far, regulators have banned spot cryptocurrency ETFs, though they have approved a futures ETF. But futures is a contract, not a direct purchase of crypto, so you have to pay interest to hold it, it’s not suitable for long-term investments, and it doesn’t allow cryptocurrency to be used in steaking and pharming, for example.
What ETF will give the crypto market
Here are the main points of ETF affect:
- Legality. Right now, crypto is a gray area for most countries. Once ETFs are approved, companies and private investors will be able to invest legally: report to the tax authorities, seek protection in court, bequeath and gift their shares, etc.
- Liquidity. The capitalization of the U.S. stock market alone is $40 trillion, while the entire cryptocurrency market is worth $1.1 trillion. A cryptocurrency ETF will allow large investors to overflow capital, which will give a huge boost to the entire crypto.
- A familiar instrument. For conservative investors, crypto is synonymous with the word scam, but an approved ETF is a familiar tool. What this fund invests in is a matter of tenths.
Already several large U.S. funds have applied for a spot bitcoin ETF. Including BlackRock – the world’s largest investment company, which has $8.5 trillion under management, remember that the capitalization of the entire crypto is only $1.1 trillion. Grayscale, ARK, 21Shares and others are also vying for the bitcoin-ETF issue.Cryptocommunity expects that regulators will give up and we will see bitcoin-ETFs in the next year or two. Then the inflow of funds from new investors multiplied by the halving of bitcoin may pump the price.