How Bitcoin ETFs Make Crypto Accessible for All

Introduction

Today, at the moment, dated June 21, 2024, Bitcoin stands at $64,592.05.

Bitcoins are currently too expensive to buy for regular or novel investors. Only seasoned crypto investors with a significant bank balance or wealth can afford to buy or invest in Bitcoins efficiently. Bitcoin ETFs, on the other hand, provide more favorable options for regular investors.

Bitcoin ETFs bridge the gap and offer one of the safest options to invest in Bitcoin, without even owning it. Thanks to Bitcoin ETFs. The best thing is that with Bitcoin ETFs, even traditional investors can now invest and make profits from Bitcoin. Let’s understand how.

Explaining Bitcoin ETFs

Although Bitcoin ETFs have been in discussions since 2013, they became effective on Jan 10, 2024, approved by the US Securities and Exchange Commission and got listed the next day.

What are Bitcoin ETFs?

In the simplest terms, Bitcoin ETFs can be defined as publicly traded investment funds through which even traditional investors, not exclusively crypto investors, can get exposure to Bitcoin without owning the actual cryptocurrency. The ETFs are traded on traditional securities exchanges like New York Stock Exchange and Nasdaq, instead of common crypto exchanges.

By purchasing a Bitcoin ETF, the investors are not investing in the actual Bitcoin, instead, they are purchasing the shares in a fund that holds the actual Bitcoin. ETFs are a regulated investment vehicle and are majorly designed to provide traditional investors the exposure to Bitcoin’s price movements. However the investors don’t have to securely buy and keep the digital currency. As a result, this eliminates the technological hurdles that users often experience while investing and trading in crypto.

The Working of Bitcoin ETFs

Bitcoin ETFs function the same as traditional exchange-traded funds. And they are getting exceptionally popular; 15 billion dollars’ worth of Bitcoin investment inflow has been received since January 2024. The issuer of an ETF is commonly an asset management company that buys the underlying assets and stores them with a custodian. Then, the company issues shares to its fund to give investors access to the underlying asset held by the fund.

Now, what makes the actual difference?

…is that instead of an annual fund management fee, financial institutions have the power to buy, store, and safekeep bitcoin in the name of the ETF’s investors.

Thus, Bitcoin ETF investors do not actually buy Bitcoins, but they purchase shares in the Bitcoin pool. The process involves creating new ETF shares to match the demand. When someone sells their shares, they are instantly redeemed, and the total number of ETF shares in circulation is effectively adjusted.

Endnote

Bitcoin ETFs are one of the most innovative, effective, and secure ways to invest in Bitcoin without actually buying the crypto, which is too expensive now. The ETFs are safer than the actual cryptocurrency, as they are listed on popular exchanges and properly regulated.

ETFs also give traditional investors who lack crypto knowledge an opportunity to invest and make gains through Bitcoin. Since the latest Bitcoin halving, ETF prices have also experienced a boom.