The U.S. Securities and Exchange Commission (SEC) is planning to come up with Bitcoin ETF by September 2018. Almost all of us are already aware of the most trending virtual currency whose unexpected hike as compared to the world famous currencies has entirely shocked the stock and trade markets. World economic scenario has been consistently noticing a shocking value of Bitcoin which has amazingly reached up to $8000 for the period of the last two months.
Exchange Traded Funds (ETF)
Prior to getting an idea about the Bitcoin ETF, let us first understand about ETF itself and the role being played by it in handling the crypto market. ETF refers to Exchange Traded Funds which are the kinds of funds fulfilled with the sole proprietary or the ownership of all the underlying assets such as stock shares, bonds, foreign currency, gold bars etc to name a few. The shares are ultimately formed after the appropriate division of the ownership of assets. Bitcoin can be considered as an asset while discussing the trading phenomenon involved with Bitcoin ETF.
ETF vs Mutual Funds
ETF somehow looks similar to that of the Mutual Fund investments like procedure but the concept and trading of ETF are completely unlikely as compared to that of the mutual funds. The major difference holds in the trading based procedure of ETF as compared to the mutual funds. ETF trading is similar to the common stock of the stock exchange for which merely a Demat account is required. Additionally, the net asset value of the ETF is decided after the market closure, however, the price of ETF is only decided during the hours of running market. Unlike mutual funds, ETFs can be purchased in whole numbers as compared to that of the mutual funds. Investments in EPFs are even much cheaper than the mutual funds and accordingly gaining widespread popularity very soon.
Bitcoin ETF: Understanding the concept
As already discussed above, a kind fund owning the list of underlying assets (as already mentioned) is known as an ETF or the Exchange Traded Funds and hence the Bitcoin ETF can be defined as the kind of funds surrounded by the underlying assets as Bitcoin. The Bitcoin ETF provides an opportunity for the retail-based investors to purchase the Bitcoin frequently via the stock markets without having the necessity to own it permanently. Retailers and buyers enjoy several benefits by purchasing a Bitcoin ETF as it frees the buyers from unnecessary worries of the Bitcoin maintenance and about ensuring the occasional safety and security.
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Market Affect of Bitcoin ETF after Successful Approval
Bitcoins have not yet been able to grab the investor’s attention as mainstream investing mediums. The Bitcoins have never been under the control of the country’s rulers and even it does not have any physical existence following which the existence and mining of this cryptocurrency have been made officially banned by the several countries. The mining procedures involve the occurrence and implementation of complex algorithms done by the experts at different levels without the involvement of government procedures. The unwanted mining activities and the dominance of Bitcoins very soon started to badly affect the financial market resulting in an uncontrolled situation.
All such misconceptions and drawbacks will be fulfilled by the introduction of the Bitcoin ETF by increasing the adoption of cryptocurrencies in a huge number at various levels. Accordingly, the crypto community has been noticed extremely optimistic assuming the benefits about it with regard to the official economic market in a genuine manner. The Bitcoin value is also assumed to get higher after the introduction of this Bitcoin ETF. An amazing hike of $35000 is also being expected by the Bitcoin researchers and cryptocurrencies based market analysts. Another positive side of the Bitcoin ETF investment is that there will only be a risk of losing 0.5 % of the investor’s portfolios will be there making the market situations extremely smooth, volatile and versatile as well for the good sake of the investors.
However, after the successful approval of the Bitcoin ETF, Bitcoins and several undiscovered, as well as discovered cryptocurrencies as well, will participate and become a part of several market portfolios which are maintained periodically as yet. Accordingly, there will be an added adverse effect of the personal portfolios along with the accredited investor’s portfolios as well. Additionally, the newcomers without prior exposure to market happenings will get a chance to suddenly enter the market without understanding the proper investment timings. Accordingly, there will be a huge risk of losing the invested assets. The current investment scenarios via the different financial mediums including banks and other investment agencies requires the appropriate KYC to be done prior to investing in the bonds, shares and other options, however, the Bitcoin ETF introduction will negatively impact the importance of KYC for several wallets as well as the companies concerned with the asset management based stuffs.
The approval of Bitcoin ETFs will even be beneficial for it by making it legalized for the cryptocurrency industries for frequently and fearlessly trading as that of the other existing physical currencies. Despite being virtual, it will be genuinely handled and easily taken over via the defined channels. More and more companies along with the government as well will start the dealing and accepting procedures and the existence will positively impact the economic growth rate of any country. The approval will even positively result in the market legitimacy for the under processed Bitcoin types and will thereby positively affect the market in the economic scenarios. The consistent positivity involved with the Bitcoin ETF will make it competent enough to proudly compare the same with the Gold and associated assets which play a key role for market establishment and stability. The equivalence of this newly introduced cryptocurrency type in the market and the dominance of Bitcoin ETF will itself be enough to make the traders, investors, buyers, and users understand the importance in the mainstream currency compared to that of the physical currencies of the various countries affecting the markets positively.
Useful article! Yes, the major difference holds in the trading based procedure of ETF as compared to the mutual funds. …….ETF trading is similar to the common stock of the stock exchange for which merely a Demat account is required.
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