Bitcoin Futures ETF

First of all, what is an ETF?

ETF stands for exchange-traded fund. It is a type of marketable security that tracks the value of a specific commodity, sector or asset, and it can be purchased or sold on a stock exchange, just like any regular stock. The price of an ETF can rise or fall in tandem with the asset that it is representing (like gold or silver, for example).

Where does Bitcoin come into all this? What are the benefits of a BTC ETF? Given how popular Bitcoin is, being the number 1 cryptocurrency, it was inevitable that ETFs and Bitcoin would cross paths sooner or later (right now, two parties, known as ProShares and Invesco, are trying to make a Bitcoin Futures ETF [explained below] a reality).And so came about the idea of creating a Bitcoin ETF that mimics the price of BTC, allowing a huge number of new potential investors to dip their toes into BTC, without actually having to trade BTC itself. Investing in a Bitcoin ETF cuts out any issues of complex storage and security procedures required to trade crypto. Plus, potential investors that are already familiar with the stocks market won’t even have to deal with any crypto exchanges: they can just buy and sell the BTC ETF through traditional exchanges. In essence, it brings BTC to a broader range of people outside the crypto bubble. Another benefit: during bear markets, you can short sell shares of the ETF if you think the price of BTC is going to go down.

 What is a Bitcoin Futures ETF?

Futures are a type of derivative trading instrument where two parties enter into a contractual agreement to buy or sell bitcoin at a predefined price at a later date. In essence, you agree to buy or sell bitcoin at a particular price on a specific date no matter what the price ends up being. The agreed date when both parties must fulfill their obligations is known as the contract settlement date or expiration date. When a bitcoin futures contract expires, whichever party agreed to purchase bitcoin would have to buy it at either a premium or a discount (as it’s highly unlikely bitcoin will be exactly the same price upon expiry as it was when the contract was agreed). How much that person has to pay depends on the market price (also known as the spot price) at the time and the value of each of the futures contracts they have in their possession.

In terms of a BTC Futures ETF, it would track the price of Bitcoin futures instead of the actual market price of Bitcoin.This was a compromise reached in accordance to requests by the U.S. Securities and Exchange Comission (SEC), who is all but confirmed to approve these BTC futures ETFs very soon, in just a few days.
On Thursday evening, Bloomberg reported that the SEC will allow the ETFs, which are from ProShares and Invesco, to begin trading next week. (The report cited anonymous sources.)

If the SEC does allow the futures ETFs, it will be the first Bitcoin-tied ETFs approved in the U.S., though ETFs tied to futures contracts are still not quite the pure Bitcoin ETF that crypto investors have hoped to get. Still, it’s seen as a first step toward mainstream adoption. It looks like ProShares is going to win the battle for first bitcoin ETF officially approved by the SEC, but expect a number of similar bitcoin ETF filings from the likes of ARK, Bitwise, VanEck, Valkyrie and AdvisorShares to eventually get their approvals as well.

The bottom line:

This news likely caused the pump to 61k that we saw today.The ProShares BTC ETF should be out by next week.If more ETFs are approved, this will open the flood gates to more investors getting into Bitcoin, although not in a “pure” form, as they’ll only be interacting with an ETF based around Bitcoin futures and not the coin itself. Still, we’re witnessing something of a historical event for mainstream adoption at the moment.

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