Bitcoin Etfs: It's Significance In The Cryptospace

moyeon (70)SKP [Mod]in Steem Alliance • 8 months ago

Introduction

There has been a great revolution and significant innovation in the world of the traditional financial system and the cryptocurrency market and this modern revolution is known as the Bitcoin Exchange Traded Funds(ETFs).

It is the aim of this modern financial innovation to break the barrier, bridge the gap and create a relationship between the failing traditional financial system and the innovating cryptocurrency network.

In this post of mine I will be writing about; what is Bitcoin Exchange Traded Funds, How does Bitcoin ETFs work, Advantages and disadvantages and possible impact in the crypto space.

What Is Bitcoin Etfs

There is saying, a quote that people like saying a lot of my friends do say it says you cannot eat your cake and have it back well that saying does not apply in this case.

Bitcoin Exchange Traded Funds is an investment opportunity or package that allows it's investors to actually get in on the action of the cryptocurrency market without actually owning that said digital coin or token.

It provides the investors with a master key into the cryptocurrency market allowing them exposure to the cryptocurrency market under strict regulations using the accounts of brokers with ease and convenience.

Those that partake or invest in this investment product or package do not have to own or create a cryptocurrency wallet or go through all the stress that comes with it and this package is open to both firms and individuals.

How Does Bitcoin Etfs Work

Haven read up to this point and haven learnt what Bitcoin exchange traded funds is I'm sure you would love to know how it works, well here it is it is not complicated at all.

Basically a Bitcoin is bought and held by the Bitcoin Exchange Traded Funds(ETFs) or sometimes a derived contract that follows and copies the market movement of Bitcoin.

Source

The issuer of the Exchange Traded Funds(ETFs) is the one that buys the Bitcoin or the derived contract that copies the price movement of Bitcoin. He holds the Bitcoin whilst making sure that the interest of the investors are secured and providing transparency.

Any one share of the Exchange Traded Funds issued represents a piece or fraction of ownership of the Bitcoin held and the price or value of the ETFs is almost reciprocal to the price of the Bitcoin and thus allowing the investors to predict the price of the Bitcoin without really owning the the Bitcoin.

Impact Of Bitcoin Etfs On The Crypto Space

Upon reading up to this point and after seeing the disadvantages and advantages of the Bitcoin Exchange Trades Funds you might wonder what impact or effect it must have had on the crypto space well here they are;

DIVERSIFICATION OF INVESTMENT PORTFOLIO

There is a saying, quote that says do not keep all your eggs in one basket and that is the opposite of diversification that is not keeping your egg in one basket.

Basically diversification of portfolio simply means the process or strategy of spreading ones investment into several different investment package or assets inorder to reduce risks.

Bitcoin Exchange Traded Funds helps the investor diversify his portfolio by giving him the opportunity get in the action of cryptocurrency and make profit without actually buying hence providing an alternative investment opportunity different from the typical buying of cryptocurrency or Bitcoin.

Bitcoin Exchange Trades Funds allows investors the opportunity to make the best out of the upward trend of Bitcoin and also reduce the risk of loss as a results of price volatility.

INCREASING PARTICIPATIONS OF INSTITUTIONS

Bitcoin Exchange Traded Funds have so much potential and if allowed the same ime to cook and grow it would be capable of recruiting and attracting investment from institutions and firms.

Institutions who at first might not have given cryptocurrency a second thought or opportunity as a result of its volatile nature and lack of fixed regulations.

The attention and trust of the institutional investors will be earned when they notice that this new investment package curb and fight most of the risk, setbacks or concerns they might have been having.

The involvement and participation of firms and institutions in the cryptocurrency market will really have a great impact and would be a cause for celebration see as it will bring about credibility and stability.

INCREASING MARKET LIQUIDITY.

Basically liquidity in terms of cryptocurrency simply refers to the ease and speed with which cryptocurrency tokens can be bought or sold without it significantly or drastically affecting or changing the price and value of the said cryptocurrency in the cryptocurrency market.

With Bitcoin Exchange Traded Funds taking the lead when it comes to institutional trading, it ensures that it's investors individual or institution can take, hold or exit positions with ease and not much effect on the cryptocurrency market.

Seeing as it makes use of brokerage accounts and does not actually buys the bitcoin. As liquidity increases so also will the volatility of price of Bitcoin also reduce. What an interesting impact on the crypto space.

GAINING RECOGNITION OF REGULATORY BODIES

Source

The typical cryptocurrency operates on a gray area when it comes to regulations and because the government and other authorities having trying so hard to set strict regulations all to no avail they do not recognize or approve of it.

But this time around Bitcoin Exchange Traded Funds(ETFs) have been able to gain their recognition and approval seeing as Bitcoin ETFs has and operates on fixed and strict regulations.

And with this approval and recognition from these body of authorities the cryptocurrency especially Bitcoin could now receive a warmer and broader acceptance and this would help in a lot of ways like help in gaining the trust of the people who had concerns of the authorities not backing cryptocurrency.

NEW PRICE DISCOVERY AND INCREASED MARKET EFFICIENCY.

Bitcoin Exchange Traded Funds(ETFs) has the potential to help and contribute to new price discovery and also increase market efficiency in the cryptocurrency space.

The Bitcoin Exchange Trades Funds maintain close watch of the price of Bitcoin closely watching and correlating market sentiment and the demands of the investor in real-time.

As more and more investors take part and participate in Bitcoin ETFs, the price and market value of the ETF shares would come together with the price of Bitcoin, providing and giving very important data and insights into market trends, sentiment, and investment decision.

The market price information recorded help investors efficiently operate the market as well as get educated on and learn how to make good and profitable investment decision as well as risk management in the cryptocurrency market.