The Bitcoin ETF Race Picks Up Pace

What's interesting about Bitcoin (BTC) is its history; the cryptocurrency established a track record of predictability, albeit below-average volatility when compared to that of altcoins and the wide crypto market. Bitcoin has been regarded by many as an ideal asset for store of value, and this has captured the attention of large institutional players such as BlackRock Fidelity Investments and Goldman Sachs.  

All eyes are now on such institutions which aim to offer Bitcoin as an investment tool derivative in the form of a spot exchange-traded fund (ETF).

What is an ETF?

An exchange-traded fund or ETF in short is an investment vehicle which tracks the performance of a particular index, sector, commodity, or asset. It allows investors to gain exposure to one or more assets via a single investment instrument.

The prevalent desire for a Bitcoin ETF emerged in 2018, but the entities which were intensifying their efforts towards establishing such derivative tool were slapped with regulatory disapproval and challenges.

What is a Bitcoin ETF?

A spot Bitcoin ETF is backed by physical Bitcoins that underpin the value of the ETF. If the value of the digital coins backing the ETF rises, the value of your investment can generally be expected to increase. In simple terms, if the price of Bitcoin increases, which will in-turn boost the value of the ETF.

Futures Bitcoin ETF is a futures contract that allows investors to speculate on the future price of Bitcoin. This means that investors can gain exposure to the price movements of Bitcoin without holding the cryptocurrency itself.

The Bitcoin ETF Race

Attaining a Bitcoin ETF license comes with regulatory and operational obstacles, and as behemothic institutional players including BlackRock and Grayscale double-up their efforts on greenlighting their envisioned Bitcoin ETF, the race for the first spot Bitcoin ETF heats up.

Currently, there is about a dozen applications filed to the United States Securities and Exchange Commission (SEC) for establishing a spot Bitcoin ETF. The SEC is known for its regulatory scrutiny and stringent standards when it comes to crypto-related initiatives.

The American financial watchdog will have the final say, and market participants are eagerly awaiting the emergence of crypto-centric investment tool on the traditional market.