Bitcoin ETFs have been getting a lot of attention recently with approvals in both North and South America.
A Bitcoin ETF is a Bitcoin paper product traded on stock exchanges. These ETF products are backed one to one by and track the actual price of Bitcoin with a high degree of precision. This is different from a Grayscale Bitcoin trust which trades at wild premiums and discounts to the actual price of Bitcoin because they do not track the price of Bitcoin; it is a trust that owns Bitcoin.
As at the moment, Canada has three Bitcoin ETFs. They have shown that they are pretty popular with investors in Canada. There is over a billion dollars worth of Bitcoin locked up in these ETF products, and the number grows continuously.
Brazil has also launched a Bitcoin ETF product, and both of these milestones are very important. Most investors are keeping an eye out for a US-listed Bitcoin ETF. This is because the US stock market is massive.
The United States of America represents over half of all global equity market value. Listing for a Bitcoin ETF on US exchanges is a pretty big deal.
The advantage of a Bitcoin ETF is that it trades like a stock. A more comprehensive range of investors who might be afraid of managing their private keys or other security issues can hold them in a brokerage account. You use your brokerage and get access to Bitcoin.
An ETF will have a more accurate price compared to the Grayscale trust. You can add it to your retirement account and get long-run tax benefits in your Bitcoin investment.
Bitcoin funds only accept institutional investors, but an ETF is available to all. Anyone with a brokerage account can use it.
An ETF disadvantage is that you do not truly own your Bitcoin; it is just a paper IOU which is quite okay for most investors but not for "crypto natives."
Another con is that you have to pay a management fee to the company holding the Bitcoin on your behalf. Even if it is a meager amount, you still have to pay the fees.
Holding Bitcoin in your crypto wallet has zero fees when compared to holding paper Bitcoin.
A Bitcoin ETF will have a very high likelihood of making the Bitcoin price surge, which is a good thing for holders.
From the outcome of Gold and Gold ETF, we can begin to expect what will happen to the price of Bitcoin.
In the chart above, the price of gold went up as soon as an ETF was introduced.
