This post will be useful for you to be informed and to make your own interpretations about the market. I will summarize everything as clearly as possible. Enjoyable reading. 💙
💫What is ETF?
ETF is actually a type of Mutual Fund that you have all heard of. Funds are instruments that contain multiple investment options and allow you to invest in all these investment instruments at a single average price. However, Funds cannot be traded continuously. Usually, the price is updated at the daily closing and trading is done this way. ETF is the traded version of this.
🌠Bitcoin ETF?
Bitcoin ETF is; It is a fund that can be traded only with Bitcoin. These funds offer investors the opportunity to make an indexed investment in the cryptocurrency Bitcoin. By applying for an ETF, companies such as BlackRock and Fidelity in America were actually stating, "I want to create a Fund for those who want to buy Bitcoin." Recently, the first Bitcoin Spot ETF was approved. Thus, those who want to invest in Bitcoin, but want to do it the way they know, started using this Fund. One of the most important reasons why Bitcoin ETFs are preferred is that investors do not have to have technical knowledge or use a digital wallet when investing in Bitcoin. This is a reason for preference for investors who are accustomed to traditional financial markets and want to invest in Bitcoin.
🔄So how does the system work?
Investors go to these companies and buy Bitcoin ETFs. Companies buy Bitcoin in return for it. In fact, we can say that these companies act as intermediaries to invest in Bitcoin. Because Crypto is still confusing and there are many investors who have trust problems. They don't want to abandon the path they know. We can see that this situation increases the interest in Bitcoin and reflects positively on the price after it is accepted. However, it still cannot be said that it is the most logical way.
As I mentioned in the article, people using ETFs only invest in Bitcoin. But they don't buy Bitcoin! They take a position on the price of Bitcoin. Other than that, there's nothing they can do. Instead, brokerage firms store, control and use this bitcoin. This situation, of course, causes the deprivation of many different functions that can be done with Bitcoin.
In my opinion, the Bitcoin we buy should be ours and we should have control over it. Especially with each passing day, a different usage area is created on Bitcoin and the function of Bitcoin increases. In order to experience all this, Bitcoins must be under our control. That's why it's more reasonable to literally buy Bitcoin from exchanges. It is up to us to evaluate this Bitcoin. Either use it within the Ecosystem or put it into an application where you can earn interest. If you do not trust anyone, after purchasing Bitcoin from a central exchange, move it to your own wallet and store it as you wish. I think this is the way it should be and much more logical for the crypto investor. In addition, lower commission fees are the most important reason because there is no extra intermediary. If someone else does this job for you, they will also ask for the cost. ETFs may have transaction costs and fund management fees, which may reduce returns. When the fees of Crypto Asset Exchanges and ETFs are compared, it can be analyzed that Crypto Asset Exchanges are much cheaper.
Again, there is a very important situation that we are actually deprived of with ETF. Satoshi Nakamoto's vision for Bitcoin since his first article "Bitcoin: A Peer-to-Peer Electronic Cash System" is to be used as a payment method as a digital currency. Bitcoin has low transaction costs. It is a preferable option for international money transfers. You can make cross-border payments using Bitcoin. However, the same is not the case for ETFs. Bitcoin is increasing its awareness and validity day by day and is becoming accepted all over the world. It allows you to carry out your daily expenses with Bitcoin. It will be much faster and easier to have ready-made Bitcoin on hand in case of an urgent need, rather than dealing with ETFs.
Additionally, Users can conduct Bitcoin transactions using Decentralized Finance applications without revealing their credentials. This provides a significant advantage for protecting personal privacy. However, Bitcoin's transactions should not be considered completely anonymous because transactions are public on the blockchain. You can still perform these transactions without revealing your identity.
In conclusion, although Bitcoin ETFs are an important product in the cryptocurrency market, they have advantages and disadvantages. Investors can choose the method that suits them best and feels safe.
