Bitcoin Spot vs Futures ETF: What’s the Difference?

Exchange traded funds or ETFs are Popular investment vehicles that allow Individuals businesses and other Entities to gain exposure to the price Action of an asset without ever actually Holding said asset ETFs are typically Traded on major stock exchanges like the New York Stock Exchange or the London Stock Exchange stock Brokers and online Brokerage platforms trade these ETFs on Behalf of their users so as their name Suggests Bitcoin ETFs allow users to bet On the value of Bitcoin without the Typical challenges associated with Buying securing and managing the digital Currency so what's the difference Between Bitcoin spot and Futures ETFs Both Bitcoin spot ETFs and Futures ETFs Are financial instruments that allow Investors to gain exposure to the price Action of Bitcoin but they accomplish This in different ways Bitcoin spot ETFs Hold actual Bitcoin in custody when an Investor buys shares in a Bitcoin ETF The provider purchases an equivalent Amount of Bitcoin from the open market And adds it to its Holdings so likewise When they sell their shares the ETF Provider sells the equivalent amount of Bitcoin from its Holdings this buying And selling process occurs when the ETF Is rebalanced this provides a reliable Way to gain exposure to bitcoin's price Fluctuations since the ETF directly

Reflects bitcoin's price Bitcoin Futures ETFs on the other hand do not directly Own Bitcoin instead they allow users to Invest in Bitcoin Futures contracts Which are agreements to buy and sell Bitcoin at a specific price on a Specific date the value of these ETFs Isn't just influenced by Bitcoin spot Price but also by expectations of its Future price which can lead to the Futures ETF price diverging from the Spot price Futures ETFs are considered More flexible financial instruments and Bring with them their own set of Benefits and risks unlike Bitcoin spot ETFs Futures ETFs can be used to short Bitcoin in the United States and most Other countries ETFs are a type of Regulated Financial product which means Providers must meet specific criteria And obtain regulatory approval before Offering it to the public this can Provide a sense of security to investors Unwilling to invest in unregulated Financial products now let's talk about The advantages of a Bitcoin spot ETF So today most Bitcoin holders purchased Their Bitcoin through a centralized Exchange a peer-to-peer Marketplace or Via a broker though this is now a Relatively simple process some would-be Investors are put off by the challenge Of holding securing and transacting in Digital currencies like Bitcoin instead

Many investors would rather take a Hands-off approach to bitcoin investment Using Brokers to purchase hold and sell Their Bitcoin on their behalf this would Allow less technically Savvy investors To gain exposure to bitcoin's price Action and potentially open the Floodgates to investments from Mutual Funds Pension funds insurance companies And more Bitcoin spot ETFs offer a Variety of benefits over Bitcoin Futures ETFs which could make them a more Desirable investment option some of These advantages include simplified Structure so investors don't need to Grapple with complex nuances like Expiration dates margin calls and Leverage also direct price tracking so Since a Bitcoin spot ETF is directly Backed by Bitcoin its price is likely to Be closer to the actual Bitcoin spot Price unlike Futures which can deviate Due to considerations like backwardation And contago also reduced counterparty Risk so Futures contracts require that Parties involved fulfill their Obligations counterparties can in rare Cases refuse or be unable to fulfill Their agreements which can impact the Futures Contract holder also enhance Liquidity so since Bitcoin spot ETFs Require Brokers to directly purchase Bitcoin to hold in custody some believe That the ETF will help to boost the

Overall liquidity of the Bitcoin spot Market so why are there no Bitcoin spot ETFs yet Well despite numerous requests over the Years the U.S Securities and Exchange Commission or the SEC still have not yet Approved a Bitcoin spot ETF since 2013 The SEC has rejected dozens of proposals Reasons for the projections have varied Over the years with the SEC generally Claiming that the Bitcoin Market isn't Big enough to sustain a Bitcoin spot ETF And that there are inadequate measures In place to prevent Market manipulation And fraud nonetheless in August Europe Saw its first Bitcoin spot ETF approved In Amsterdam the Bitcoin spot ETF which Trades under the ticker of Bitcoin was Introduced by Jacobi asset management And began trading on the euronext Amsterdam stock exchange in August some Believe that this could help beat the Path for other similar products Elsewhere potentially including those in The U.S meanwhile the SEC is currently Evaluating eight different Bitcoin spot ETF applications as of this video Including one from the largest asset Manager in the world BlackRock those Vary significantly in their form and Structure differ in their custodian Choice fee structure creation and Redemption process insurance offering And more nonetheless the SEC does not

Appear to be in any rush to approve a Bitcoin spot ETF with the next Bitcoin ETF decision date scheduled for October 17th of 2023 will we finally see the Approval of a spot Bitcoin ETF in the US Or another extension of the deadline Only time will tell

Coinbase
OUR TAKE

Coinbase is a popular cryptocurrency exchange. It makes it easy to buy, sell, and exchange cryptocurrencies like Bitcoin. Coinbase also has a brokerage service that makes it easy to buy Bitcoin as easily as buying stocks through an online broker. However, Coinbase can be expensive due to the fees it charges and its poor customer service.

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