January 10, 2024 was a tumultuous day with information published by the SEC on Someone "took advantage" of posting false information, and then the SEC immediately deleted that post.
The price of Bitcoin overnight surged to $48,000 and then corrected back to $46,000 in just a short time! Finally, the Bitcoin ETF has been approved!
So what is the Bitcoin Spot ETF that has the entire crypto community so interested:
Definition of Bitcoin Spot ETF
First we need to know some definitions of:
ETF: Exchange Traded Fund is an investment fund that simulates the fluctuations of an index of an asset type
Spot: Delivered immediately
So with Bitcoin Spot ETF we can understand this is an investment fund that simulates the Bitcoin index. This fund must be required to purchase and store BTC
Benefits of the Bitcoin Spot ETF
Cryptocurrency ETFs and Bitcoin Spot ETFs are financial instruments that simulate the performance of one or more cryptocurrencies. They allow investors to interact with cryptocurrency markets indirectly, eliminating the need to personally hold or manage digital assets.
These ETFs bridge the gap between the world of traditional finance and the growing digital asset sector, providing transparent, regulated cryptocurrency investment opportunities.
Previously, it was very difficult for financial institutions to invest in Bitcoin even though they really wanted to because they had to go through many complicated issues about paperwork, announcements, Bitcoin storage methods, taxes... But when there are ETF funds then that will make large cash flows from major Wall Street financial institutions easily accessible to BTC and thereby open up greater growth opportunities as BTC can reach more people
It is for this reason that everyone is extremely interested in information about the Bitcoin Spot ETF! Because for Crypto investors, especially Bitcoin investors, this is news that can greatly affect the price of Bitcoin and the upcoming future of Bitcoin.
Difference between Bitcoin future ETF and Bitcoin Spot ETF
Previously we had a Bitcoin future ETF, but we need to differentiate because their structures are different:
Bitcoin Future ETF (Bitcoin ETF Futures) is a type of ETF that uses Bitcoin futures to track the price of Bitcoin. A futures contract is an agreement to buy or sell an asset at a future date at a pre-agreed price.
Bitcoin Spot ETF (Bitcoin ETF Spot) is an ETF that holds Bitcoin directly. This means that the fund will buy and store Bitcoin in a custodial wallet.
We can see the following photo to better understand the difference
Source: OKX
summary
Global regulators, including the United States Securities and Exchange Commission (SEC), have carefully researched and reviewed crypto assets and related products. The purpose of this is to ensure investor safety and market integrity.
The SEC in particular has been cautious about spot Bitcoin ETFs. This type of ETF will directly hold Bitcoin. The SEC is concerned that spot Bitcoin ETFs could increase investor risk and destabilize the market.