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What is Bitcoin ETF and why it is so important for investors

Bitcoin ETF

The ProShares Bitcoin Strategy ETF has been approved in the US and it will start trading on the New York Stock Exchange (NYSE) from today. This is a very big milestone and an exciting step towards crypto global adoption. Douglas Yones, the N.Y.S.E.’s head of exchange-traded products, is quoted as saying that a range of crypto-linked ETFs will get approval eventually. The above ProShares Bitcoin Strategy ETF tracks bitcoin futures only, but there are numerous other filings that are pending approval and some of which include bitcoin spot ETFs as well.

The ETF is already up on the NYSE’s website, suggesting clearly that trading is imminent eight years after the first application for a bitcoin ETF was filed.

What is Bitcoin ETF and why it is so important for investors?

An exchange-traded fund (ETF) is an investment that tracks the price of a basket of underlying assets and is tradable on U.S. stock exchanges. In the above case, the funds would track the price of bitcoin futures traded on the Chicago Mercantile Exchange (CME), rather than bitcoin itself. These funds won’t hold actual bitcoins. Instead, they will deal in bitcoin futures, which trade separately on regulated U.S. exchanges such as CME.

Regulators prefer futures-based ETFs because the SEC lacks jurisdiction over crypto trading venues that aren’t registered as exchanges in the U.S. The SEC says that leaves investors vulnerable to fraud and manipulation because regulators have no insight into where bitcoins are coming from and how prices are being determined.

The SEC hasn’t approved exchange-traded funds that hold bitcoin or other cryptocurrencies directly, and the agency has suggested it wouldn’t back such a move at this time.

With the bitcoin ETF coming into play, the crypto community believes that it would increase the cryptocurrency’s legitimacy and make it easier for institutional investors to get exposure. The effect is also seen in the bitcoin price that has gained over 10% in the last 7 days after ETF announcements had started coming in. Currently, bitcoin ($BTC) is traded at $62,776.72 USD with a 24-hour trading volume of $40,089,437,325 USD and it is looking to break its all-time high (ATH) of $64K in coming days.

YTD BTC price chart
YTD BTC price chart, Source: CoinMarketCap

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