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Monday, December 6, 2021

Why investing in Bitcoin Might be a Better Idea Than Spending Money on Futures ETF

According to Bloomberg News, after roughly a decade of negotiating with the regulators, the ETF is about to get a fund that can make it possible to track the cost of Bitcoin. However, given the situation, it is easier for any investor to buy bitcoins now. 

In 2013 crypto investors Cameron and Tyler Winklevoss were the first to submit a proposal. Aside from that, several others tried for permission for the Bitcoin fund for the now almost $6.8 trillion ETF industry

Then, investing in bitcoin was not so easy due to technicalities where an entire series of new vocabulary had to be used and make use of digital encryption keys so that the same would not be lost. 

One of the main reasons why regulators in the United States were not agreeing to accept the proposal of the bitcoin fund was the nature of cryptocurrency’s volatility, aside from the market being dominated by fraud and manipulation. However, the proposal gathered attention this year following cryptocurrency and its deep-rooted stake in the financial system of late, says Bloomberg News. 

The Securities and Exchange Commission is slated to permit the setting up of the first Bitcoin futures exchange-traded fund. Although, Bitcoin futures and Bitcoin sound similar, however, there are differences as well. 

Futures keep a tab of the spot price of Bitcoin indirectly using the contracts that are overseen by Chicago Mercantile Exchange. These transactions also require that investors must use collateral by putting down cash for trading. Bets on the movement of price are used by traders. Despite that, the cost of futures, as well as Bitcoins, tend to be in alignment. 


Bloomberg Highlights what Actions to take Under Differing Conditions

Find out what to know when considering buying crypto.

  • If Bitcoin Exposure is Needed in a Traditional Brokerage Account

For customers trading from larger and older brokerages, Bitcoin futures ETF might be the only option to get Bitcoin exposure. You will come across many that will not let you buy Bitcoin directly causing clients to resort to Cash App or Robinhood Markets. 

  • If you are Looking for a Safer Offering and Crypto-Crazed

Few investors find solace when SEC greenlights a product. If you have been looking forward to getting into crypto but fear that there is not enough security, you could use an ETF format that’s approved by the US regulators. According to Bloomberg News, there is always an additional layer of safety and comfort for the investors for funds backed by the SEC. 

  • If you do not Want to Disturb your Keys and Digital Wallets

Unlike crypto, the concept of which is not known by all, ETFs can be a safer alternative for you. 

  • If an ETF that Physically Holds Bitcoin is not What you Want to Wait for

One of the biggest advantages of Bitcoin futures ETF is that it is trending and is happening.

Why Must you Steer Clear?

You can stay away from the Bitcoin futures ETF for the following reasons cites Bloomberg News.

  • If you are Aiming at Reducing Costs

A Bitcoin future ETF may be convenient, but it may be an expensive proposition in some cases since it attracts a significant fee. Bloomberg Intelligence assesses that the actual price for the upcoming funds maybe around 1%. This means that for every $1000 that you invest, $10 is the annual fee. 

  • If Bitcoin is New for You

If you are just jumping on the crypto bandwagon, ETFs may not be the best option. There are concepts like backwardation and contango that although will be dealt with by the trader, yet it is not something that the newcomer would find himself comfortable with. 

  • If you Want to Explore the Range of Offers at Your Disposal

Bloomberg News reports that it is quite likely that there may be four Bitcoin futures ETFs that may trade towards the end of the month. However, there are more to follow suit. The SEC is at the moment reviewing at least five more as per Bloomberg Intelligence. 

  • If you are Wary About a new Product

No one is familiar with the fact about how the Bitcoin futures ETFs will fare. It is quite likely that the prices could deviate from the underlying holdings as a result of a mismatch between demand and supply. The outcome is unsure. 

Experts and analysts say that it is best to give it some time.


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Josie Patra
Josie Patra is a veteran writer with 21 years of experience. She comes with multiple degrees in literature, computer applications, multimedia design, and management. She delves into a plethora of niches and offers expert guidance on finances, stock market, budgeting, marketing strategies, and such other domains. Josie has also authored books on management, productivity, and digital marketing strategies.

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