1. What is a Bitcoin ETF?
A Bitcoin ETF (Exchange-Traded Funds) is a type of fund that allows you to trade Bitcoin on traditional stock exchanges, such as Binance or Bybit, as if it were a stock. A Bitcoin ETF is an Exchange Traded Fund that invests in Bitcoin, tracking the price fluctuations of Bitcoin.
2. Types of Bitcoin ETFs
There are two main types of Bitcoin ETFs:
Bitcoin Spot ETFs: These ETFs invest directly in actual Bitcoin, exposing you to the real-time price of Bitcoin.
Bitcoin Futures ETFs: These ETFs invest in speculative products based on the future price of Bitcoin. They do not need to hold Bitcoin and do not track the current market price of Bitcoin.
3. Companies Operating Bitcoin ETFs
Major companies operating Bitcoin ETFs include BlackRock, Invesco, Franklin Templeton, WisdomTree, Valkyrie, Fidelity, Ark Investment Management, and Bitwise. Among these, BlackRock ranks first in ETF assets under management with 3,110 trillion won (2.6 trillion dollars).
4. Advantages and Disadvantages of Bitcoin ETFs
4.1 Advantages
One of the main advantages of a Bitcoin ETF is the stability of custody. Although you can invest in Bitcoin on a cryptocurrency exchange, there can always be problems with the exchange. For example, the exchange could be hacked or have operational difficulties due to regulations. However, Bitcoin ETFs have passed SEC approval and are managed by one of the most reliable exchanges in the world, the CME (Chicago Mercantile Exchange). This means that investing in a Bitcoin ETF can be safer than holding Bitcoin on a regular cryptocurrency exchange.
4.2 Disadvantages
The fact that all currently released Bitcoin ETFs are futures ETFs. In futures ETFs, if a rollover cost occurs, the return is lower than that of a spot ETF. For example, even if the price of Bitcoin rises by 100%, the return on the Bitcoin ETF may be less than 100%.
5. Bitcoin ETF Investment Strategies
You can also consider a Tax Loss Harvesting strategy for Bitcoin using a Bitcoin ETF. However, since there is no clear guide from the IRS yet, this part needs to be carefully reviewed. More case studies are needed to see if there is no substantially identical problem.
6. Conclusion
The Bitcoin ETF is a futures ETF that trades Bitcoin in the cryptocurrency market, launched in October 2021. This is a post where you can look at the pros and cons, advantages, disadvantages, comparison, BITO, XBRF, etc. of the Bitcoin ETF. We have looked at the overall content of the Bitcoin ETF. Just as the price of gold rose after the gold ETF was first released in 2004, many people are expecting a rise in the price of Bitcoin following the release of the Bitcoin ETF. However, since only Bitcoin futures ETFs have been released so far, it is noteworthy when the Bitcoin spot ETF will be released.
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