Bitcoin ETF is gradually but certainly cementing its place in the USA’s financial space. Undoubtedly, cryptocurrencies have become a mainstay in the financial market. Not surprisingly, this narrative is no different in the US, as many investors and traders have recognized the numerous benefits and ever-growing potential of cryptos. 

However, some experts identified some key areas — volatility and decentralization — that made cryptocurrency investments relatively high-risk compared with other options. As a result, crypto-based ETFs are in development to help tackle the risks of the volatile crypto ecosystem.

You see, an exchange-traded fund (ETF) allows you to trade a unique type of fund on an exchange like a stock. This is because they combine two important attributes — the limitless potential of trading these special funds and the ease of trading stocks. 

So, it was only a matter of time before the ETFs switched their attention to cryptocurrency. Today, we have Bitcoin ETFs, the latest type of crypto-based ETFs on the financial market. 

This article will take an insightful look at Bitcoin ETFs and their effect on the US financial market.

What are Bitcoin ETFs?

Bitcoin ETFs are exchange-traded funds that track the value of Bitcoin and let you trade the cryptocurrency on traditional financial markets instead of cryptocurrency exchanges. These ETFs allow an individual to invest in Bitcoin without the hassle of learning the working principle of a crypto exchange. 

The appeal of investing in Bitcoin ETFs is that it eliminates the complex storage and lengthy security procedures required for crypto investments. 

Since Bitcoin is currently the largest cryptocurrency globally and still has a lot of untapped potentials, the creation of a Bitcoin ETF was inevitable. Besides, ETFs are currently the hottest investment areas and were designed to capitalize on the potentials of special funds.

Due to the unregulated nature of Bitcoin trading, the Securities and Exchange Commission (SEC) is skeptical about the development and launch of a Bitcoin-ETF. But the demand and pressure from investors have caused them to approve crypto-based ETFs. 

Keep reading to find out more!

How Does a Bitcoin ETF Work?

ETFs can be likened to investment vehicles that monitor the performance of an asset or group of assets. These traded funds allow investors to buy into certain assets without necessarily owning or holding them.

Therefore, if you are the type of trader concerned only about the gain and losses of an asset, an ETF will give you a simple alternative to trade the asset. Furthermore, when you consider that exchange-traded funds are aimed at a group of assets, they allow investors to focus on more than one type of investment.

That said, how does a Bitcoin ETF work? 

A bitcoin ETF is designed to track and follow the price of the world’s largest cryptocurrency. It allows traders and investors to benefit from the potentials of the asset without learning its complicated trading process. You won’t also have to worry about storage because you don’t own any portion of the asset. 

Bitcoin ETFs in the USA

After a long period of contemplating approval, the Securities and Exchange Commission helped achieve a landmark moment in the crypto space — the launch of ProShares Bitcoin Strategy ETF (BITO). BITO is the first bitcoin ETF and has already begun trading.

While the SEC has done its best to avoid direct involvement in the cryptocurrency market, it cannot ignore the near-limitless potential that is waiting to unfold. As a result, the agency failed to issue a formal statement to approve a bitcoin futures ETF. But because the ETF is already in full swing, the agency is unlikely to block this listing. 

According to the SEC handbook, although ETFs need to have an SEC registration, they don’t have to announce the new ETF formally. So, if the agency has no objections to its listing, they can establish the investment forum after a 75-day waiting period.

For some time now, crypto enthusiasts have been pushing for regulators to approve a crypto-based ETF. So, the launch of ProShares Bitcoin Strategy ETF was good news to the crypto space and the financial market at large. Just weeks ago, on the 19th of October, 2021, ProShares Bitcoin Strategy ETF was launched!

As a result, the crypto market experienced its largest inflows ever at a total sum of $1.47 billion. Before this, the record for inflow into the crypto market was $1.31 billion, which occurred earlier this year in January. No doubt, the crypto market took a giant step forward!

That is not all.

This new launch is expected to attract more investors to the world of cryptocurrency. As a result of this bold move, many companies, including Galaxy Digital Funds, VanEck Bitcoin Trust, Valkyrie, and Invesco, began similar crypto-based ETF projects. In fact, Valkyrie Investments also introduced its ETF to the financial market just a few days later.

So, without a doubt, Bitcoin EFTs are making waves in the United States, and if the numbers are any indication, it has received a very enthusiastic reception.

Final Take

It is not a far leap to say Exchanged Traded Funds are the future of the financial market in the US and globally.  They offer investors a wide range of possibilities and the ability to tap into the near-limitless potential of mutual funds. 

In the same way, Bitcoin ETFs have also shown the lucrative nature of cryptocurrency investments. With the launch of more bitcoin-based ETFs, it’s only a matter of time before more cryptocurrencies are added to the mix. A number of them are already under development, and the world patiently anticipates the benefits they would offer to the financial market.