Spot Bitcoin ETFs (exchange-traded funds) have been the latest buzz in the crypto world. Although not recent, the SEC has just turned its attention to these new investments that can change the market forever.
These assets are directly linked with Bitcoin’s price, but owning them doesn’t mean having Bitcoins, but rather a share of the fund correlated with the cryptocurrency’s value.
While this seems complex and unnecessary, the truth is that spot ETFs have plenty of benefits that make investors’ jobs easier and safer since they allow investing without owning cryptocurrency, which provides more liquidity.
But what’s best about them is that they’re about to receive regulatory approval from one of the strictest bodies, the SEC authority (Securities and Exchange Commission), which has repeatedly expressed doubts about cryptocurrency. However, things are different when it comes to spot ETFs.
Crypto ETF expert Stuart Barton predicts the approval of spot BTC ETFs
In a recent interview, Stuart Barton discussed the challenges of his company in applying for BTC and ETH futures-based ETFs, which helped him understand how trading these assets is affected by a cryptocurrency’s popularity and tendency to get more or less wanted as an asset.
For instance, Bitcoin ETF applications were incredibly demanded and appreciated by investors when approved, but things were different with Ethereum. Only the first approved batch was of real value, after which the ETFs became unwanted, decreasing their value.
There was also the initial excitement about Bitcoin Futures-Based ETFs, which weren’t as advantageous as spots since they’re directly tied with the cryptocurrency and present certain risks of contango.
Hence, many investors might’ve been skeptical about spots after getting their hands on these assets. However, their numerous benefits are apparently leading to a fast and thorough approval by the SEC.
Companies and users boosting Bitcoin’s price due to anticipated purchases
Many companies are excited since their applications are accepted on the go, and investors’ behaviors increase the Bitcoin price.
Whether using a regular crypto exchange, an automated crypto trading bot or opening an investment account, people have traded ETFs considerably recently, fueling their popularity amid approval processes from authorities.
Indeed, the process used by the SEC to approve spot Bitcoin ETFs has more steps, and it might take some time for an asset to be listed and traded on a national securities exchange. We can explain the system in three basic parts:
- The application step requires companies interested to submit a specific filing to the authority where they describe the ETF in detail along with their objectives, strategies and risk factors;
- The review step is the most strenuous because the SEC must analyze all applications within a 45-day window but can lengthen the extension based on several factors, which might disappoint most applicants;
- The approval and final step mean the ETF can be listed and traded, allowing other investors interested in the project to buy and sell parts of the spot ETF;
Investing in Spot Bitcoin ETFs is in high demand
Many investors are challenged by Bitcoin’s increasing volatility, demand and price since the cryptocurrency is slowly but steadily approaching its maximum coin supply.
Unfortunately, even long-term investing can sometimes be risky, so having access to spot ETFs is like a breath of air for most of them.
Investing in spot BTC ETFs is also quite simple. You need to open an investment account and fund it with cash. Then, you can find a coinbase trading bot on the market to select ETFs to purchase and then only execute the trade to get the shares of the currency.
Before the upcoming approval, spot ETFs were considerably risky due to lack of legislation, but an increasing number of issuers that will be approved will ensure customer’s safety.
At the same time, they’ll contribute to an efficient system that offers direct exposure to cryptocurrency without putting investors at risk.
Spot Bitcoin ETFs vs Bitcoin Futures-Based ETFs
Although they’re both new to the market, spot and futures ETFs are already battling for media coverage and investors’ interest. There’s a big debate among investors and experts on what asset is best since both benefit one’s crypto portfolio. However, there is indeed a considerable difference between them.
BTC Spot ETFs can be used without relying on crypto exchanges, and since their fees are lower, the buying process is more streamlined compared to other similar assets.
Spots are also beneficial for companies since they don’t have to acquire or store them in a wallet, removing the risks associated with this practice.
On the other hand, Bitcoin Futures ETFs are not linked with the Bitcoin asset but rather the futures contracts associated.
These contracts represent an agreement on buying or selling the coins at a specific price and date, which is a huge advantage for investors because this eliminates the risk of using expensive exchanges.
But this aspect is also the biggest disadvantage because contracts expire, and holders must always be wary of the agreements and the market’s condition before sealing another contract.
This might be among the reasons why futures are still not getting approved while being the first to penetrate the market.
There are some things the SEC cannot protect investors from
The main reasons why the SEC continuously rejected Spot BTC ETFs and futures has to do with their view on cryptocurrencies. The authority often states that these assets are prone to market manipulation and fraud, a considerable danger to beginners.
However, most investors know the risks associated with these ETFs and have created their safety nets.
Indeed, the market’s volatility can be scary, but it’s an aspect that everyone knows about. But, since this is only the flip side compared to benefits, investors can make conscious decisions about their actions.
What do you think about ETFs?
As the SEC slowly shows signs of approval for spot Bitcoin ETFs, Bitcoin’s price increases, and investors’ sentiments are getting more optimistic. With some luck, spot ETFs will have the chance to show why they’re so appreciated soon after more projects are approved.