bitcoin ETF

Last week, we saw the launches of two highly anticipated Bitcoin futures products traded on America’s largest exchanges. This coincided with Bitcoin’s all-time high price of USD 67,000.

The ProShares Bitcoin ETF fund broke its records, reaching a billion dollars in volume on its first day. The following day it reached $1 billion in assets under management. It is the first fund in just two days, beating a record set by a gold fund in 2004.

There is an apparent demand for Bitcoin exchange-traded products, and more are in the pipeline. Therefore, Eric Balchunas, a senior ETF analyst for Bloomberg, tweeted about this milestone:

In this article, we will take a look at the pros and cons of Bitcoin ETFs.

The Pros 

With Bitcoin ETFs, asset managers and financial advisors can now add Bitcoin exposure to their client portfolios. Before the ETFs were launched, it was not easy for financial advisors to gain access to crypto. Now, they can do so through major exchanges such as Nasdaq and the NYSE. Also, they can earn fees on it, which could spur more adoption.

In addition, the SEC approval of such funds has cemented Bitcoin’s asset class position. It is no longer considered an exclusive “tech thing.” Moreover, institutional funds and investors want a slice of this new investment alternative.

As a result, this would be bullish in the long run as it is now much easier for investors to get involved in these new ETFs. On the other hand, fund managers can trade bitcoin ETFs for their clients with better tax implications.

The launch of BTC ETFs may lead to a spot-based fund being approved in the future.

The Cons 

Bitcoin ETFs are currently futures-only contracts that track markets but do not hold the asset directly. They allow investors to gain exposure to it, but they never actually hold any BTC. Therefore, since October 19th, Grayscale announced the launch of the Bitcoin Spot ETF.

Futures contracts also allow investors to take short positions, which wasn’t possible before the products were launched in December 2017. As a result, futures contracts may introduce more volatility to markets, especially if leverage is involved.

In addition, Bitcoin ETFs could also centralize the decentralized currency as single entities could control large amounts of it and theoretically manipulate markets.

Lastly, there could be a significant sell-off now that the funds have been launched. This occurred in January 2018 after the first BTC futures went live on the CME and CBOE.

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