A bitcoin exchange-traded fund (ETF) tracks the behavior of the Bitcoin price, therefore, you don’t buy the asset itself, but the value of the price. In this way, it allows investors to gain exposure to the cryptocurrency without having to own it.
Traders can buy or sell the security on an exchange and settle in cash, this means that investors will receive fiat currency or actual bitcoin upon exit.
Main Advantages and Disadvantages of Trading ETFs
Investing in bitcoin ETFs instead of buying bitcoin has its benefits and risks, which we will outline below.
Some of the benefits of investing in bitcoin ETFs are:
-Buying ETFs online is safer and faster than buying digital assets on a cryptocurrency exchange, as well as having fewer disruptions.
-For a traditional investor it becomes hard to learn how a cryptocurrency platform works, so these investors will prefer to use platforms they already know.
-Going through the process of securely storing cryptocurrencies is not necessary.
-There is more liquidity on the stock exchanges, for example it can be bought and sold at any time, just like a stock, and therefore it is easier to buy and sell ETFs.
– There are clearer tax implications for traditional financial products than for digital assets. A regulated national exchange is supervised and has insurance from the government in case of some unforeseen disaster, such as theft, scams or market manipulation.
On the other hand, there are some disadvantages to be aware of:
-ETFs charge management fees, while owning bitcoin is free.
-The cryptocurrency market has full availability, whereas you can only buy and sell ETFs during specific market trading hours. That is, you would have to wait to buy or sell bitcoin if it moves considerably.
-While you can buy bitcoin anonymously, buying ETFs requires Know Your Customer (KYC) checks.
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