Is investing directly in bitcoin better than investing in bitcoin futures ETFs?

Is investing directly in bitcoin better than investing in bitcoin futures ETFs?

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Answer Is investing directly in bitcoin better than investing in bitcoin futures ETFs?

Bitcoin is among the best performing assets of all time, with a market capitalization of $1 trillion already.

Be it direct trading, ETFs or futures ETFs.

The USA is currently home to two bitcoin-based ETFs by investment firm Proshares and Valkyrie.

VanEK was also allowed to launch a Bitcoin futures ETF.

The SEC’s approval of bitcoin futures ETFs has increased investor options for exposure to crypto assets, particularly bitcoin, and more ETFs are expected to follow soon to accommodate the apparent high demand in the market.

Currently many investors are wondering which way to invest in bitcoin is through direct exposure or through bitcoin ETFs.

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Here is an answer that has a comparison of the two methods:

Live Bitcoin Trading vs Bitcoin ETF:

The Bitcoin futures ETF is a far cry from the spot Bitcoin ETF, like those already approved in Canada and Brazil for Bitcoin and Ethereum.

The main difference is that a bitcoin ETF tracks bitcoin futures and not the current price of the asset itself, while a bitcoin ETF tracks the actual price of bitcoin.

The Winklevoss twins, owners of crypto company Gemini, were the first to apply for a bitcoin ETF in 2013.

Many other investors have also tried over the years, but the Securities and Exchange Commission (SEC) has been adamant about rejection and postponement.

The first Bitcoin futures ETF, BITO, offered by ProShare, traded more than $200 million in 24 hours, reaching more than $1 billion in assets under management days after it debuted on October 19.

The Bitcoin Futures ETF “BITO” tracks the Bitcoin futures contracts of the Chicago Mercantile Exchange (CME).

Amid this interest, the price of Bitcoin has skyrocketed, reaching its most recent all-time high at around $66,900 on October 20.

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The second bitcoin futures ETF was launched by digital asset management firm Valkyrie on October 22 on the Nasdaq exchange.

Bitcoin futures ETFs:

Bitcoin futures ETFs provide exposure to Bitcoin for investors who will avoid Bitcoin products due to regulatory uncertainty or perceived technical difficulties.

The SEC’s green light is an assurance that the market is regulated and legal to invest in while buying stocks is more familiar than having to hold digital wallets or deal with market volatility to own bitcoin outright.

ETFs are also cash-settled and allow investors to trade bitcoin under the same umbrella with other assets, facilitating performance and tax reporting.

Therefore, ETFs save investors the headache of learning about and managing their crypto assets.

But this does not negate that Bitcoin futures ETFs are also complex.

Naim Aslam, chief market analyst at AvaTrade, advises the average investor to stay away from these funds.

For example, the futures market is traded on margin rather than the actual product, which means that investors are speculating on a derivative’s price movement.

This causes the bitcoin futures price to differ from the actual price in the bitcoin spot market.

Read:What is the forecast for the current month in the cryptocurrency and futures industry?

On the plus side, the fact that the fund can trade a premium in a bull market and discount in a bear market is good news for investors looking for short-term gains.

Whereas, retail investors may fall into the trap of the additional costs of investing in ETFs such as the delay trap that causes futures contracts to rise above spot prices.

Another valid drawback with ETFs in general is the limit that limits the number of contracts the fund can offer in a month.

Bloomberg reports that the CME futures limit is 2,000 contracts, which applies to the new Proshare fund, which reached 1,900 by October 21, while the November limit exceeded 1,400 shares.

In addition, the ETF can only hold 5,000 futures contracts for subsequent months.

Finally, unlike the 24/7 cryptocurrency market, ETFs are old school and only trade when the market is open, like any stock listed on an exchange.

On the other hand, the launch of bitcoin futures ETFs is seen as a win for the cryptocurrency market and another step in the nearly decade-long struggle for the approval of a bitcoin ETF in the United States.

At the same time, cryptocurrency users and other investors interested in live trading have expressed strong opposition to Bitcoin ETFs rather than spot trading in Bitcoin ETFs.

Bitcoin live trading:

Learning how to invest and trade in the cryptocurrency market is important, especially for new users.

Users must be familiar with blockchain technology and how to use different tools and resources to trade or participate in these ecosystems.

Intelligent personal finance management skills, (including mistakes) become crucial and once users practice them, they usually tend to stick with these methods, which are quite separate from traditional market methods.

Thus, buying, selling, managing and finding new investment opportunities becomes easier.

At the same time, an educated individual contributes to the goal of Bitcoin and decentralized technology, which aims to return power and control to people over their finances.

in conclusion:

It can be said that the entry of Bitcoin ETFs on traditional exchanges benefits exposure and adds liquidity and regulation to the cryptocurrency market, where these investment funds play an important role.

Whereas, for investors, especially retail investors with long-term goals, it is highly recommended to invest the time to familiarize yourself with the concepts of cryptocurrency trading and proprietary to stand a chance of making high profits of course, taking into account the associated risks.

Read also:

The Dubai Financial Services Authority announces a framework governing investment in digital tokens

Long-term holders of bitcoin begin to show signs of bitcoin spending

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