What is ETF for cryptocurrencies?
ETF (English. “Exchange-Traded Fund”) is a fund whose shares are traded on the exchange. The Fund is a legal organization on the balance sheet of which is an asset or portfolio of assets, formed according to certain criteria. Its composition may include securities, valuable goods, bonds, currency, stock indices and so on.
Each share of the ETF is provided with a certain share in the assets of the fund. Thus, the owner of the ETF invests in the portfolio of the fund, but does not own its assets directly.
Create funds for specialized companies. They also manage them, for example, if necessary, they rebalan their composition and keep reports. The largest ETF operators in the world are BlackRock, Vanguard, State Street, InVESCO, ISHHARES and Charles Schwab.
How popular are ETF?
Today, exchange funds are one of the main tools for investment. According to Informma Financial Intelligence, in November 2021 the total amount of funds in the ETF funds exceeded $ 10 trillion, although back in 2018 this figure was $ 5 trillion.
For institutional investors, this is a suitable way of passive investment. Unlike active strategies, ETF does not require their holders to store and trade in assets themselves, have a simple legal structure and show a more stable result in the long run.
ETF retail investor allows you to quickly and effectively diversify your portfolio due to the presence of a large number of assets at the heart of the fund. Finally, operators of exchange funds charge a much smaller commission from their holders than investment funds.
Why do you need ETF for cryptocurrency?
Not all major investors are ready to directly acquire digital assets due to an inferior legal basis and difficulties with their storage. In turn, ETF would become the usual and simple way to enter the cryptocurrency market.
ETF is a familiar legal structure that works in traditional financial infrastructure. It is also a highly liquid tool, which in a short time can be placed on the largest stock exchanges, providing the possibility of investment in cryptocurrency for institutions and retail users. Responsibility for storage of the basic asset is borne by the operator of the exchange fund.
What crypto -etf are already trading?
Today, in different countries, exchange funds are traded indirectly related to the blockchain-industry-for example, those whose price is tied to the basket of shares of public crypto companies. But special attention is focused on the ETF based on the cryptocurrencies themselves: in this case, the fund operator acquires digital assets for him, therefore, serves as a source of additional demand for cryptorr. The price of such instruments depends on the spot prices for crypto assets.
The United States is considered the main potential market for a spot crypto -etf. Since 2018, many companies have submitted applications to the SEC for registration of the exchange fund. However, the regulator has not yet approved a single similar tool.
The first spite bitcoin -etf was released in Canada in February 2021. It is called Purpose Bitcoin ETF and is traded on the Toronto exchange. The amount of funds in the fund exceeds $ 800 million.
In addition, ETFs are traded in different countries, indirectly associated with cryptotics.
Among the most famous are Bitcoin Strategy ETF (BITO) from Proshares. At the end of 2021, he received the approval of the SEC and was listed on the New York Stock Exchange. The BITO basic asset – futures contracts for bitcoin, which have been traded on the Chicago commodity exchange since 2017. As of the end of May 2022, the fund volume is about $ 1 billion.
Similar exchange funds after the SEC approval at the end of 2021 were produced by Vaneck and Valkyrie Investments. In April 2022, the regulator allowed to launch a Futula Bitcoin-ETF from Teucrium.
GrayScale controls https://gagarin.news/news/the-new-conservative-leader-wants-to-make-canada-a-blockchain-hub/ ETF called Future of Finance (GFOF), which includes shares of public companies operating in the field of blockchain and cryptocurrencies. In May 2022, she leaf on the GFOF analogue on European exchanges.
BlackRock also launched ETF based on crypto industry companies. Samsung Asset Management plans to release a fund based on blockchain companies on the Hong Kong Stock Exchange.
In addition, there are exchange funds based on altcoins. For example, at the beginning of 2022, in Brazil, the ETF bidding began, which was built on the defi-tokens indexes.
How to buy ETF for cryptocurrency?
To purchase exchange funds, you need access to the trading platforms of those countries in which crypto -etf is traded. For this, most likely you will need a bank account and services of a licensed broker. In their status, ETF correspond to ordinary shares, so a wide circle of investors can buy them.
There is another way – to use the trading platform that provides access to many markets, such as Interactive Brokers or Freedom Finance.
What are the prospects of ETF for cryptocurrencies?
Experts await the launch of spotto crypto -etf in the next 1-2 years. Now SEC is considering several applications at once. For example, from Grayscale-it wants to convert its bitcoin trast to ETF. Also, ARK and 21Shares want to release their cryptocurrency exchange fund.
In March 2022, one of the largest US brokers Charles Schwab filed an application for the release of ETF on the basis of its own “crypto economy index”. The base asset, as they say in the company, will be “companies that benefit from production or use of cryptocurrencies and other digital assets”.