Bitcoin ETFs: Enter the world of cryptos without actually owning it

Crypto assets have gained incredible popularity as a niche asset class over the past few years. Cryptocurrencies have the potential to provide huge returns despite ultra-high volatility.

There are various products on the market for investors that can help them participate in the new asset and combat the volatility.

Exchange Traded Funds (ETFs) are one such product that tracks a specific index, sector, stock, commodity or any other assets to bring the best of both worlds.

Bitcoin ETFs were introduced in October 2021 and attracted a large number of investors who did not want the hassle of storing the tokens in hot or cold wallets.

Bitcoin ETFs are actively traded on the New York Stock Exchange’s Acra network. Investors can buy BITO shares through an intermediary or directly from ProShares. BITO is the largest actively managed Bitcoin ETF to date.

Why a Bitcoin ETF?
It is a passive form of investment where investors usually don’t have to worry about short-term fluctuations and put their money into a particular asset for the longer term. Even during times of volatility, they tend to make the most of it by averaging their price.

Mohammed Roshan, CEO and co-founder of GoSats, said that passive crypto investments are a good idea and a great way to achieve financial goals, but only if investors stick to strong names that have proven their reliability and value.

Gaurav Dahake, CEO and founder of Bitbns, said that Bitcoin ETFs are a stress-free form of investment as they allow them to stay invested for an extended period and get the most out of their investment.

Who should choose it?
Market experts suggest that new and novice investors who have a low risk appetite and those who do not wish to own cryptocurrency directly or cannot track the markets frequently should enter the crypto space through Bitcoin ETF.

“ETFs are a great way for institutions and corporations to invest in Bitcoin while regulation around crypto is still hazy,” Roshan said.

In addition to this, Dahake believes that an investor who is not concerned about short-term market sentiment, or who is looking to diversify their portfolio into an asset class with high returns over the long term, can look into it instead of buying Bitcoin directly.

Time horizon and approach?
Crypto investments are long-term and require deep and thorough research. Short-term investments can lead to disappointment and loss of rewards.

An investor delving into a Crypto ETF should choose a prominent and legitimate one based on its market capitalization and understand the holistic purpose of the token it was developed for, BitBns’ Dahake advised.

Limits
The actual crypto market is a 24×7 phenomenon that operates 365 days, but ETFs may have restrictions on trading hours. Additionally, ETFs, because they are less risky than actual cryptocurrencies, may have a higher free structure. ETFs are only available for selected tokens.

Bitcoin ETFs on stock exchanges are only open during market hours, GoSats’ Roshan emphasized. “Bitcoin is very nascent and not suitable for investors who plan on a knee-jerk exit.”

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. They do not represent the views of Economic Times)