With spot bitcoin ETF approvalinvestors can now directly access cryptocurrency through an investment fund, risk reduction and increasing movement safety. This change reflects a a new regulatory approach indicating an increase institutional acceptance and potentially stimulate a significant increase in interest and investment in the industry cryptocurrency. However, certain regulatory uncertainties remain and the debate over whether bitcoin is suitable as assets that can be invested in the long term remains open. Experts warn that its inclusion in a portfolio requires attention and should take place in a regulated environment with regard to risk associated with fluctuations prices and to aspects that have not yet been fully tested bitcoin.
- Reducing the risks of manipulation
- Change in regulatory approach
- Impact on the market
- What doesn’t change?
- How much will it cost to invest in Bitcoin ETFs?
First of all, it is a matter of simplification. The new spot bitcoin ETFs are designed to make it easy purchase bitcoin. From now on, you will not need to create a digital wallet and store keys, and you will not need to create an account on a cryptocurrency exchange. You can simply use it same brokerage account which is used to trade shares, bonds and other ETFs.
In this way, both private and institutional investors have an opportunity expose yourself to cryptocurrency the strongest in the world without necessarily owning itgenerating new and massive capital inflow into the sector. This is precisely because an ETF (which is a passively managed investment fund) is a simple way to invest in assets without having to directly buy the assets themselves. However, it remains important to remember that the approval of the Security and Exchange Commission (Sec, the US body that oversees the financial markets) applies to the instrument (that is, the ETF precisely), while the underlying currency/asset is not yet regulated.
Reducing the risks of manipulation
Spot ETF approval reduces the risk of market manipulation. Bitcoin futures contracts (already approved by the SEC in 2021) may be subject to larger price swings, while spot ETFs, linked directly to the actual price of Bitcoin, offer greater stability and more accurately represents the value of the cryptocurrency. To ensure that their property is safewhich the new Bitcoin ETFs rely on third party administrators, common practice in the ETF world. For example, gold ETFs usually work with banks that have safe deposit boxes to store physical gold. Most of the new bitcoin etfs have chosen Coinbase as a custodian. Then, when one of these funds buys bitcoin, the coins are parked in a special account on Coinbase. These custodians generally keep keys to cryptographic assets in “cold storage” or offline locations, without internet connection, to keep them safe.
As he remembers Moneyfarm observatoryan independent Italian financial advisory company, however, it should be noted that “all membership matters illegal use of bitcoins and its purpose from a functional point of view have not yet been resolvedand if the crypto community wants this to become a truly investable asset, it will need to find a way to control this behavior, both by encouraging greater external regulationthan self-regulation”.
Change in regulatory approach
A point that cannot be understated is that the approval of a spot ETF also indicates a change in theregulatory approach to cryptocurrencies. The SEC has shown greater openness to financial products directly linked to Bitcoin, signaling a growing acceptance and understanding of the dynamics of the cryptocurrency market. “I believe the approval of the Spot Bitcoin ETF will further support this mass adoption of crypto-assets by institutional investors In the United States“, explains Eric Demuth, co-founder of the trading platform Bitpanda.