One of the reasons many investors are skeptical about an investment in Bitcoin is its security and regulatory nature. However, the introduction of the cryptocurrency ETF brought about a change in the way investors look at it. At the time of this article, Bitcoin recently broke past its all-time high, as it went past $73,000 since its inception. Since then, Bitcoin has continued to set all-time highs. Let’s learn about the cause of this recent rise, and how Bitcoin ETFs factor into this surge.
What Is a Bitcoin ETF?
An ETF, or Bitcoin Exchange Traded Fund, lets investors gain access to Bitcoin’s price movement without holding the assets. Bitcoin ETF shares are usually traded on conventional stock exchanges. This makes it easy for individuals to partake in the cryptocurrency market. In January 2024, the SEC approved the trading of Bitcoin spot ETF. This fund holds the crypto instead of a futures contract and is traded on top US exchanges.
This approval of Bitcoin ETF shows validation of the cryptocurrency, as against its initial repulsion as a volatile and speculative asset. Since its inception, the Bitcoin ETF has gathered interest from institutional and retail investors since it offers a regulated and convenient way of investing in Bitcoin. This is very appealing to most investors bothered about the token’s regulatory issues, security or technical and complex areas. Institutional investors such as Grayscale Bitcoin, Fidelity Wise Origin Bitcoin Fund, and VanEck Bitcoin Trust are some of the top holders of Bitcoin spot ETFs.
How Bitcoin ETFs Helped Push the Price of Bitcoin
Before the approval by the SEC, many investors expected that Bitcoin’s price would soar if the cryptocurrency was opened to institutional investors. For instance, the BlackRock Bitcoin ETF (IBIT), a new spot Bitcoin ETF, bought above $778 million Bitcoin only on March 6, further adding to the 12,600 Bitcoin that flowed into IBIT’s hands, reducing the available, total supply of Bitcoin. This Bitcoin purchase further drove up the value of the cryptocurrency.
Types of Bitcoin ETFs
Spot Bitcoin ETF
This is an exchange-traded fund with the aim of providing investors with a direct access to live Bitcoin market prices. Here, spot means the current asset price which is Bitcoin in this case. Bitcoin spot ETf unusually holds real Bitcoin as its underlying assets with an attempt to track its real-time price very closely.
Futures Bitcoin ETF
In futures, investors don’t hold real Bitcoin. Rather, they make use of Bitcoin futures contracts to get access to the cryptocurrency. Bitcoin futures gives investors the access to bet and speculate on the assets’ future price.
Endnote
Bitcoin’s rise in recent weeks can be largely attributed to the SEC approval of Bitcoin ETFs. Bitcoin ETF directly gives investors investment access to these volatile but lucrative assets. With the mainstream investment vehicle for Bitcoin available, the possibility of Bitcoin rising due to demand is high. However, investors must remember that cryptocurrency investment is risky and volatile. Seeking advice from experts before investment is a highly recommended option.
