What are ETFs, what are SPOT BITCOIN ETFs, what are the pros and cons, and what is their relationship to BTC and what is the difference between them and the rest of the ETFs?
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Let's mention what ETFs are first and then start with SPOT BITCOIN
1️⃣ What is an ETF?
Index funds (ETFs) are open-ended investment funds that track the movement of a specific index, but the documents that make up these funds are registered and traded on the stock market, such as stocks and bonds. Index funds are distinguished by the opportunities they give investors to cover entire markets in different countries or different sectors at a cost less than Other investment methods
2️⃣ How do ETFs work?
Exchange-traded funds, for example, work by tracking a particular index, such as the S&P 500, and holding a basket of assets that represents the underlying index. ETFs that track the S&P 500 hold a group of stocks included in the index. This allows investors to gain exposure to the stock market without having to purchase individual stocks
How often are profits distributed?
Companies can pay dividends quarterly, semi-annually or annually. Dividends are paid to shareholders on a predetermined date, known as the “payment date.” The entire process, from declaring dividends to payment, is usually managed by the company and financial intermediaries, which reduces the procedures you have to follow as an investor.
3️⃣Types of ETFs
What are mutual funds and why should you know about them?
Stock funds: invest in company stocks.
Bond funds: invest in bonds and fixed-yield securities.
Commodity funds: invest in commodities such as oil, gold, and precious metals.
Real Estate Funds: invest in commercial and residential real estate
4️⃣ Negatives first
Venture funds are considered high risk, so you may lose all your investments. The fees associated with investing in a fund can be high risk. You may have limited control over how your money is invested. It can be difficult to get your money from an investment fund if you need it before the fund matures
Credit risk is the risk facing the project as a result of the inability to repay debt rights or pay interest on the capital.
Inflation risk is the risk of loss of purchasing power. ...
Liquidity risks include the concerns facing the project due to lack of liquidity in the market. ...
Risk management...the art of investing without risk...
5️⃣ Positives Second
What are the advantages of an investment fund?
One of the biggest advantages of mutual funds is the diversification it provides to the investor, as the money is spread across several assets, reducing potential risks and increasing the chances of return. Investment funds also provide ease and comfort in investing, as the investor does not need to constantly follow the stock market or make buying and selling decisions himself.
Investment benefits
By investing, individuals can earn returns that beat inflation, allowing their wealth to grow and maintain the value of their holdings over the long term. Whether it is through stocks, bonds, real estate or other investment vehicles. Retirement: Investing plays a pivotal role in retirement planning
🛑🛑🛑 We finished the first comparison of ETFs, now we go and compare SPOT BITCOIN ETFs
1️⃣ What is a bitcoin ETF?
Spot Bitcoin ETF. A direct Bitcoin fund is a type of exchange-traded fund that directly holds Bitcoin as an underlying asset which has been purchased through other holders or an approved cryptocurrency exchange.
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The new ETF is called ProShares Bitcoin Strategy ETF (BITO), and it joins a narrow field of funds that provide exposure to the digital currency Bitcoin. The new Bitcoin-linked fund gives traders a way to speculate on Bitcoin without having to purchase cryptocurrency directly or create a trading account with a crypto-asset trading platform.
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A Bitcoin fund allows investors to learn about Bitcoin price movements without owning or having direct exposure to Bitcoin. Some investors with little experience trading cryptocurrencies prefer this type of exposure
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Spot Bitcoin ETF
A Bitcoin Direct Fund is a type of exchange-traded fund that directly holds Bitcoin as an underlying asset which has been purchased through other holders or an approved cryptocurrency exchange. This means that the performance of a Bitcoin Direct Fund is directly related to the actual value of the Bitcoins it holds. When investors buy shares in a Bitcoin Direct Fund, they are essentially buying a representation of Bitcoin, even though they do not actually own the cryptocurrency. Rather, they have shares in the fund.
For example, one of the spot bitcoin ETFs, the iShares Bitcoin Trust by BlackRock, holds 2,600 bitcoins. The company issued up to 400,000 shares, each share representing 0.0065 Bitcoin. This means that the performance of a Bitcoin fund is directly related to the real value of the Bitcoins it holds. To get 1 Bitcoin, you would have to buy approximately 150 shares of the fund.
After years of anticipation, the Securities and Exchange Commission has finally opened the door to discovery of Bitcoin ETFs in 2024. Only 11 ETFs have received this initial permission,
The 11 Bitcoin funds come from a range of familiar names in both the traditional finance industry and the cryptocurrency industry. It is a combination of assets that make up a very interesting combination. The table below details ETFs, their expense ratios, and introductory fee exemptions according to the Securities and Exchange Commission (SEC):
2️⃣ What stock or type does this fund work on?
Bitcoin (Bitcoin, BTC, XBT) – It is the first virtual currency. Its most important feature is the decentralization of issuance, and there is no central bank in the world that controls or monitors it. Its production is limited to 21,000,000 units, and to date more than half of the quantity has been issued.
2️⃣ First the positives
Pros of Bitcoin ETFs
A Bitcoin spot fund provides exposure to BTC price movements without the need to manage or store the digital currency, eliminating concerns about security or risks of digital wallets. Because Bitcoin funds trade on traditional exchanges, they place Bitcoin within a regulatory framework, which may provide a layer of trust. To a wider audience. Investors can hold their Bitcoin holdings in the same account as other holdings, such as stocks, bonds and commodities. Investing in a Bitcoin spot fund can be more straightforward for traditional investors, as it operates within the familiar structure of stock trading
3️⃣ Secondly, negatives
Cons of Bitcoin ETFs
While mutual funds bring Bitcoin closer to traditional finance and regulatory oversight, the broader cryptocurrency market remains unpredictable. The value of a Bitcoin Spot Fund will fluctuate with Bitcoin price fluctuations. The performance of a Bitcoin Fund may not always perfectly match the price performance of Bitcoin. Bitcoin due to fees or administrative issues.
4️⃣ What are ETF Futures funds?
Bitcoin Futures ETF
A Bitcoin futures fund is a type of exchange-traded fund that does not hold Bitcoin directly. Instead, they invest in bitcoin futures contracts traded on the Chicago Mercantile Exchange, which are agreements to buy or sell bitcoin at a predetermined price on a specific future date. This allows investors to speculate on Bitcoin's future price movements without owning the cryptocurrency itself. Bitcoin futures funds aim to achieve returns consistent with Bitcoin.
For example, the ProShares Bitcoin Strategy ETF, known as the world's first and largest U.S. Bitcoin-linked ETF by assets as of 9/30/23, typically holds Bitcoin futures contracts when the value of BTC is stable or declining. Or in an upward phase. In order to maintain exposure to Bitcoin futures, the Bitcoin Futures Fund is committed to selling futures contracts that are approaching expiration and replacing them with new futures contracts featuring a later expiration date.
5️⃣ What are the reasons that make BITCOIN so important?
Why all the excitement about the Bitcoin Fund?
About a dozen investment firms, including investment management giants Blackrock and Fidelity, have been waiting for months for the US Securities and Exchange Commission (SEC) to give them the green light to start buying bitcoin for their ETFs. After months of debate over the wording, the first agreement was approved on January 10, 2024.
This ETF has two main impacts: increasing distribution in the US and increasing the credibility of cryptocurrencies as an “asset class.” With the newly approved ETFs, Bitcoin is no longer considered suspicious or disreputable. This dramatically changes the perception of the mainstream audience. This also means that Bitcoin could start to appear in major wallets, where many retail investors can gain exposure to Bitcoin.
What are the negatives between the BITCOIN SPOT ETF?
First, we must know that the control of the digital currency market will be in the hands of the companies that manage the SPOT BITCOIN ETF, so everything will be in their hands.
1️⃣ Flows coming out of funds
2️⃣ Manipulation that occurs in the digital currency market
3️⃣ Any decline that happens to BITCOIN will harm all alternative currencies, and this thing is happening now. The majority of digital currencies have fallen by more than 40%.
4️⃣ Selling investors who were companies with ETF companies
5️⃣ Not knowing whether to buy ETFs or to buy BITCOIN itself is a big negative as to why I should buy an ETF instead of buying BITCOIN itself.
6️⃣ Transforming BUTCOIN from a digital currency into digital gold does not rise or fall according to market news
Important positives
1️⃣ The inability of manipulators to manipulate the price of BITCOIN. Alternative currencies
2️⃣ The rise of BITCOIN is gradual
3️⃣ The presence of SPOT BITCOIN ETF gives great strength to alternative currencies and high price stability
4️⃣ The possibility of the emergence of ETF SPOT funds such as XRP, ETH, or other currencies
5️⃣ The presence of SPOT ETF BITCOIN gives strong confidence to all people and governments around the world
6️⃣ The spread of digital currencies starting with BITCOIN
7️⃣ The emergence of BITCOIN supporting currencies
8️⃣ Increase in BITCOIN's market value
9️⃣ Increase in the market value of the market cap
🔟 The most expensive digital currency on the BITCOIN network
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