Key Definitions of #BTC #ETFBitcoin

An ETF is a type of financial product that tracks the price of a specific asset, index, or basket of assets and is bought and sold on a stock exchange. Generally, ETFs provide an avenue to invest in various assets while allowing the flexibility to trade on an exchange. As such, they often serve as a practical tool for diversifying market exposure.

With the advent of crypto, two major types of BTC ETFs emerged: futures and spot. A futures bitcoin ETF invests in contracts betting on BTC’s future price, providing exposure to its price movements without holding the cryptocurrency. A spot bitcoin ETF has to hold the underlying asset, reflecting its price more directly, which makes owning its shares more akin to owning BTC itself. You can refer to this Binance Academy article for a more detailed comparison.

Bitcoin trusts are another somewhat similar vehicle, differing in structure and operation. A trust acts more like a traditional investment fund, holding actual BTC. Investors own shares that represent a piece of the digital asset pool held by the trust. However, unlike ETFs, trusts are subject to premiums or discounts, meaning the price of a share could significantly diverge from the value of the underlying BTC it represents.

Grayscale Bitcoin Trust (GBTC) launched in 2015 to become the first publicly traded bitcoin fund in the U.S. As of early December 2023, Grayscale’s application to turn GBTC into a spot ETF is under consideration by the Securities and Exchange Commission (SEC). The first bitcoin futures ETF went live on the New York Stock Exchange Arca in October 2021. Now, several such products are available to U.S. investors. Of all the instruments described in this section, only spot bitcoin ETFs remain out of reach, though many believe this could soon change.

Seeking SEC Approval

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