ETFs
Bitcoin has become easier to trade in the United States thanks to ETFs The Hype Magazine: Unveiling the pulse of urban culture – From hip hop to Hollywood! Explore a diverse tapestry of hard-hitting stories, interviews and editorials covering fashion, gaming, film, MMA, EDM, rock and beyond! www.thehypemagazine.com – The Hype magazine The Hype magazine
Published on June 10, 2024 | by Jameelah “Just Jay” Wilkerson
On January 10, the SEC approved spot ETFs for Bitcoin, opening the door to new investors who do not want to take additional steps when it comes to trading the digital asset. For supporters of cryptocurrencies and DeFi, the formal approval confirms that investing in Bitcoin is safe and that it will fulfill its promise of becoming a global decentralized digital currency. Since the genesis of Bitcoin, anyone wishing to own a coin would have to adopt a digital wallet or open an account on a trading platform. ETFs are more suitable for beginner investors because they offer flexible trading, better transparency and greater tax efficiency. There are some drawbacks, however, such as trading costs.
Bitcoin can be bought and sold like mutual funds or company stocks. This is a popular investment option in the United States, and there is ample evidence to suggest that trading activity coincides with the launch of spot Bitcoin ETFs. Cryptocurrencies are easy to trade on U.S. exchanges rather than foreign platforms, and this change in liquidity can be attributed to new financial instruments. This is definitely a market development. The update comes at a time when the market is bullish on the cryptocurrency segment, highlighting investors’ growing confidence in Bitcoin as an asset class. Bitcoin dominated inflows, while Ethereum also benefited significantly.
Increased liquidity could lead to more stable prices and easier price discovery
There is a clear transformation in the liquidity dynamics of Bitcoin, with a preference for US-based cryptocurrency exchanges. Liquidity means the ease of converting Bitcoin into cash or exchanging it for another digital asset; this impacts price volatility and trading activity. In the United States, cryptocurrency exchanges have become key players in facilitating Bitcoin trading, ensuring a constant flow of assets, which improves liquidity, as there are countless buy bitcoin orders and sellers available. Although the benefits are multiple, this expansion of liquidity does not lead to dramatic price fluctuations. On the contrary, increased liquidity leads to orderly conditions in the cryptocurrency market, resulting in more stable prices and easier price discovery.
Bitcoin is more stable than stocks of tech giants like Meta and Amazon, which means investors can easily buy or sell the ETF stocks they are interested in. Spot Bitcoin ETFs provide more opportunities for institutional and retail investors. Make money through speculation without the technical challenges of managing a Bitcoin wallet or the security concerns of saving private keys. By improving liquidity in the cryptocurrency market, ETFs dominate price discovery, the process by which new information is incorporated into the price of the digital asset. When markets are more integrated, price changes across exchanges lead to price discovery.
Even though Spot Bitcoin ETFs took forever, they became instant hits
The SEC has refused to approve Bitcoin spot ETFs over fears of market manipulation because the cryptocurrency is traded in unregulated and fragmented markets that may be subject to fraud, hacking or price discrepancies. The cryptocurrency community has long looked forward to the launch of the first spot Bitcoin ETFs in the United States, which would make investing more accessible without requiring interested individuals to directly own the digital asset. In a crucial decision, the SEC has officially agreed to greenlight 13 applications to create a Bitcoin ETF that tracks the price of the underlying asset. Examples include a range of offerings from the ARK 21Shares Bitcoin ETF to the WisdomTree Bitcoin Fund.
Part of the reason why spot Bitcoin ETFs are so popular is that they allow investors to test the waters before jumping in. In other words, they can gauge market interest in possible deals. Previously, only emerging companies could engage in this type of communication, so cryptocurrency market participants are better positioned to take advantage of expanded access to capital markets. The fascination of a spot Bitcoin ETF lies in its unique utility compared to existing financial instruments. Bitcoin futures are essentially bets between two investors on where the price will be at any given time. The fund does not hold Bitcoin but gains exposure via futures markets.
Investors can choose Spot Bitcoin ETFS for several reasons
Spot Bitcoin ETFs precisely echo the performance of Bitcoin, so investors can directly trade coins because there is a direct affiliation between the ETF price and the actual market value of the cryptocurrency. Investing in an ETF is beneficial if you prefer a traditional investment vehicle to achieve positive returns. An ETF can be less expensive to own, not to mention that it trades continuously during trading hours; such flexibility is important to some investors. Liquidity is one of the most important features of a spot Bitcoin ETF. Since ETFs are traded on an exchange, they provide liquidity, meaning shares can be bought and sold without impacting the market price.
Spot Bitcoin ETFs are like other publicly traded stocks, but they have unique features
A spot Bitcoin ETF is a modern way to invest in a diversified way, so that people with small capital can take advantage of features that were previously available to large institutional investors. Bitcoin can be traded 24 hours a day, 7 days a week, but ETFs follow the trading hours of the US stock exchange, which runs from 9:30 a.m. to 4 p.m. Monday through Friday. Many brokers offer commission-free ETFs, but it is important to do your research before making your trade, as some brokers may require a minimum purchase amount or allow you to buy shares for free and then charge you their sale.
Spot Bitcoin ETFs are bought and sold at cryptocurrency market prices which change throughout the trading day based on the value of the underlying asset. You can get price quotes at any time during the trading day, consisting of two parts (bid and ask). The bid represents the price the buyer is willing to pay if you want to sell the stock, while the ask represents the lowest price the seller is willing to accept if they want to buy. Generally speaking, the smaller the bid-ask spread, the more liquid the ETF is. Simply put, the cost of buying and then selling is lower.