Now that the U.S. Securities and Exchange Commission has given the green light to the first crypto exchange-traded funds (ETFs) (Finally! it was about the time.) Holding digital assets and getting in on the action may seem like a breeze.
What is ETF
Crypto can be complex and hard to grasp for many, but with the SEC’s recent approval, buying cryptocurrencies has become much simpler for retail investors. An ETF is essentially a basket of assets that trades on a stock exchange, much like familiar ones such as SPY and IVY that track the S&P 500 index. By basket of assets, it means that it conglomerates multiple assets into single index, diversifying the risk, while also getting exposed to multiple assets.
In the case of a spot bitcoin (BTC) ETF, each fund will hold a substantial amount of bitcoin, allowing investors to buy into a fraction of that total. Unlike mutual funds, ETFs can be bought and sold throughout the trading day, offering flexibility to investors.
How to Buy Bitcoin ETF
The easiest way for most people to buy into these ETFs will be through online brokerages. If you have apps like Robinhood on your phone, you’re all set. These brokerages will provide access to the new ETFs as they become available.
One of the main draws of ETFs, especially those tracking stock indexes, is their diversified nature. However, a bitcoin ETF may still experience the volatility characteristic of bitcoin investments. Nonetheless, it is a huge step, as it could pave the way for similar products featuring other cryptocurrencies in the future.
The SEC approved several applications from companies to list spot bitcoin ETFs, including industry giants like Fidelity, BlackRock, and crypto-focused Grayscale. This competitive landscape has led to companies reducing their expected fees even before launching, offering investors a range of low-cost options to choose from. Competition is always good.
We shouldn’t forget that multiple companies have been seeking SEC approval for bitcoin ETFs since 2013. Still, the recent approval marks a significant milestone. Unlike bitcoin futures ETFs, which are considered more advanced investments, spot ETFs are designed to be accessible to anyone with a smartphone, making crypto investing more mainstream than ever before.
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