Bitcoin ETF

Bitcoin ETF (Exchange Traded Fund)

Niels Bitcoin

A widely discussed topic is the potential creation of a Bitcoin ETF. During this article an explanation is provided that explains what an ETF is, why this is relevant to Bitcoin and why a Bitcoin ETF could be positive for Bitcoin.

Bitcoin ETF

What is an ETF?

ETF stands for Exchange Traded Fund and it is rather simple to explain how an ETF works. An ETF basically mirrors the price of one or multiple shares traded on an exchange. This makes it easy for traders to trade in a collection of shares as if it is only one share. It is possible to create an ETF that follows the index of 10 companies. If you invest in this ETF, you will invest in these 10 companies simultaneously. The price increase of this ETF is equal to the average price increase of these 10 companies. It is also possible that an ETF is created for products that are normally not tradable on the stock exchange, such as oil or gold. The price of an ETF created for products such as oil and gold is equal to the normal oil and gold price. This allows people to easily invest in oil and gold by using the stock market.

Bitcoin Exchange Traded Fund

Why is an ETF relevant to Bitcoin?

An ETF is relevant to Bitcoin due to the fact that a suggestion for creating an Bitcoin ETF has been made by the Chicago Board Options Exchange (CBOE) to the US securities and exchange commission (SEC). sources have shown that around 10 August the SEC will decide whether a Bitcoin ETF should be created.

When Bitcoin ETF

Why would a Bitcoin ETF be positive for Bitcoin?

Creating a Bitcoin ETF could cause a lot of new money to enter the market. Many larger investment firms state that investing in Bitcoin is still too risky. The Bitcoin ETF could, however, put an end to this. In the new proposal from the CBOE it appears that an insurance is built into the ETF. The insurance makes sure that in case a hack occurs, the investors themselves will not be at any risk. In addition, the Bitcoin ETF will provide more legitimacy in cryptocurrencies. If the SEC approves the proposal, the SEC basically gives its blessing on investing in cryptocurrencies. This increase in legitimacy of Bitcoin will certainly ensure that many people ultimately decide to invest in Bitcoin.