7 Things You Need to Know About Bitcoin ETFs

The US Securities and Exchange Commission’s decision on the numerous applications for spot Bitcoin ETFs is expected today. If the decision is positive, the mother of all cryptocurrencies, once ridiculed by the traditional financial world, will be indirectly traded on the world’s largest stock exchanges in just a few days. Why “indirect”? These and other burning questions now need to be clarified.

ETF, “Exchange-Traded Fund,” translates as “exchange-traded fund.” A fund is a type of pot into which a large number of investors can deposit money. The fund managers then use the money raised to purchase and manage certain assets/goods. If the price of the purchased goods increases over time, investors benefit.

With an ETF, the fund also issues investment certificates that can be traded on the stock exchanges just like shares. The price of this rises and falls with the price of the underlying goods. In the case of a spot Bitcoin ETF, this means the Bitcoin price. The ‘spot’ in this terrible word means that it is the current value of the goods.

Although buying and managing Bitcoins is easier than many people think, it is not for everyone. Trading ETFs, on the other hand, is a routine affair for many traditional investors.

In fact, ETFs have even more advantages: they are also interesting for large investors, financial service providers and pension institutions. This makes Bitcoin interesting for investors who previously did not have access to it (for example pension funds) (due to legal requirements) – or were quite skeptical about it. ETFs will also improve the image and social acceptance of the mother of all cryptocurrencies. The time when Bitcoin was labeled as a gaga project by a few cypherpunks is definitely over.

In total, the SEC received 13 applications for spot Bitcoin ETFs. It remains to be seen whether all thirteen have completed all documents and complied with the SEC’s requirements. The 13 institutes are:

Both questions can only be answered with highly speculative predictions – and these vary widely. Most chroniclers expect a wild rollercoaster ride. BlackRock is rumored to have more than $2 billion in investor funds available for the ETF alone. The world’s largest asset manager manages client assets worth more than ten trillion dollars. Watson does not want to participate in short-term speculation about the Bitcoin price.

The ETF providers do not work for prosperity. For them, the products are primarily a business. And like any other product (with competing products), it needs to be advertised, sold, and made attractive to customers.

Experts therefore expect an advertising offensive from the start – a type and scale never before seen for Bitcoin. Moreover, it is first come, first served. First come, first served. The 13 providers therefore made every effort to complete the necessary formalities as quickly as possible. In an interview with FoxBusiness, a VanEck representative was confident. He expects that the products will be for sale at the stock exchanges as early as Thursday.

At the same time, a compensation battle has taken place between the designated ETF providers in recent days. Even before the initial approval, there were massive reductions, putting them well below the usual ETF standards. Bitwise is the cheapest at 0.24 percent, followed by VanEck and Ark (0.25 percent). Ark had originally planned for 0.8 percent. BlackRock charges 0.3 percent.

Here’s how it works: the buyers of the ETF investment certificates do not own Bitcoin, but only benefit (or not) from the price movement. But the situation is different with ETF providers. They have committed to the SEC to hold Bitcoins equivalent to the investment certificates. If many investors pour money into the ETFs, it will continue to flow into Bitcoin.

As a reminder, the number of Bitcoins is limited to 21 million. A few million (25 to 30 percent) of them have already been lost and have never been found. That leaves 15 million – or 0.00184 Bitcoins per person. There are currently less than two million Bitcoins available for actual purchase.

That is a matter of interpretation. Bitcoin is primarily a booking and payment system that, thanks to its decentralized architecture, allows the management of digital assets without relying on institutions such as banks. It is in the nature of this decentralized architecture that no one is excluded from it. Bitcoin is the first and ultimate jekami (anyone can join) of the financial world – and therefore inherently value-free.

It’s probably human nature that some Bitcoin proponents try to attach a political bias to the mother of all cryptocurrencies. So nothing changes. Just as little as when Wall Street discovered Bitcoin as a serious asset after fifteen years. The elegant thing about this system is that you can own as many Bitcoins as you want, but you do not gain more institutional power.

Someone who wants to own Bitcoins out of distrust, enjoyment of this elegant system, curiosity, or whatever reason is not well served by an ETF. But for those who simply want to take advantage of rising prices – like so many people – new worlds are now opening up in the US.