Cryptocurrency and digital assets are becoming a part of diverse investment portfolios. Bitcoin investment is now available without the inconvenience of sourcing, securing and storing it, through an ETF (exchange-traded fund).
Let’s see the advantages of a bitcoin ETF and why it removes some of the crypto risks.
What is a Bitcoin ETF?
A bitcoin ETF is an exchange-traded fund that tracks and mirrors the price of Bitcoin. Bitcoin ETFs can be traded on traditional market exchanges and not cryptocurrency exchanges, allowing investors to invest in Bitcoin, without buying the digital asset. This means that the risks which come with owning bitcoin are removed when buying an ETF by combining two prevalent forms of investment, ETFs and cryptocurrencies, into one package.
Advantages of Bitcoin ETFs
When buying cryptocurrency, you don’t technically hold it in your wallet, instead, you have security keys that you need to safeguard.
The biggest risk is that wallets and exchanges can be hacked and keys stolen. Even if you decide to store them offline, nothing is guaranteed. On the other hand, owning an ETF doesn’t require you to safeguard keys as you own shares of the fund.
Less hassle/Easy to understand
With the increasing popularity of digital coins, they are also becoming more and more complex and more difficult to understand. So if you are interested in digital currency investing, with an ETF you can do it securely without having to learn about mining, blockchain, key storage or distributed ledgers.
An ETF consists of more than just one asset. It could comprise of bitcoin and other existing stocks. By trading on a regulated market exchange, a Bitcoin ETF provides investors with the opportunity to mitigate risk management and diversify their portfolios.
Buying and selling bitcoin through a digital exchange can be confusing and complicated even for professional investors. This is why the Bitcoin ETF was developed- to offer investors exposure to Bitcoin and crypto without the bother of having to deal with the actual cryptocurrency itself.