US Bitcoin ETF 2021 Approval, Spot vs Futures BTC ETF | Crypto News Today

US Bitcoin ETF 2021 Approval, Spot vs Futures BTC ETF | Crypto News Today
3 min read
19 October 2021

One small step for Bitcoin, one giant leap for  mankind. The SEC has finally approved a Bitcoin   ETF and in just a second we’ll tell you everything  you need to know.

 We’re thrilled to announce that America’s first  Bitcoin ETF started trading on Tuesday morning,   October 19th. The ETF is managed by ProShares  and trades under the ticker symbol BITO. A bunch of different financial management  companies have been applying for a Bitcoin ETF   since 2017 and so it’s amazing  to see one finally get approved.  

A Bitcoin ETF is will open up crypto  to a whole new class of investors who,   for whatever reason, can’t buy their own coins  or invest in the Grayscale Bitcoin trust. All in all, the Bitcoin ETF is a big step  forward for the cryptocurrency ecosystem.   That being said, the ETF we’ve got isn’t  exactly what we’ve all been hoping for.   Rather than buying and holding actual Bitcoins,  the new ETF is based on futures contracts. There   are two key reasons why this type of futures based  ETF isn’t the best solution for most investors.

Firstly, large inflows into the ETF don’t  necessarily translate into higher Bitcoin prices.   Since the ETF buys cash settled futures contracts,  rather than Bitcoin from the spot market,   there’s not a direct relationship between  investment inflows and a price increase in BTC. Secondly, a futures based ETF is  expensive!

According to Matt Hougan,   the Chief Investment Officer at Bitwise, quote,  “The all-in cost of a futures-based ETF could be   in the 5% to 10% range once you take  into account the annualized roll yield.” Roll yield is the cost associated  with “rolling” a futures contract,   an expense that wouldn’t exist with buying  and holding real Bitcoins. The result? Anyone   who invests in the Bitcoin ETF won’t get the  same level of performance as they would from   buying Bitcoin.

For example, one financial  analyst ran a backtest of the ETF and the   results were staggering. According to his  findings, if you invested in the ETF in 2018,   by now you would have lost a *quarter* of your  money as compared to investing in Bitcoin! So even though a futures based Bitcoin  ETF is a great first step towards growing   Bitcoin’s network effect, ultimately it’s just  a stepping stone. A spot based ETF that holds   real BTC is what we’re all hoping  for. Here’s to hoping that the SEC   will approve that type of ETF  sometime within the next year! 

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Alex 9.9K
Joined: 4 years ago
Comments (1)
  1. Jonny Bells

    Be careful with your money and invest only what you are prepared to lose. You should look at the current cro coin price and make an educated guess as to whether or not you think it will continue to rise. However, remember that the cryptocurrency market is erratic and volatile.

    1 year ago ·
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