What Is Bitcoin ETF? How Will It Impact The Bitcoin Price? | Read Everything Here

Anisa Batabyal
| 06 May, 2020 | 2 min

The Bitcoin ETF is in the news nowadays. The U.S. Securities and Exchange Commission (SEC) has delayed the decision on whether to approve the list of five bitcoin-related Exchange-Traded Funds (ETFs) until September. The ETF applications were filed by Direxion investments. September 21st, 2018 is the date by which the SEC will take its final decision on it.

The whole crypto community was quite enthusiastic about it and this was reflecting in trading volumes as well. The Bitcoin price crossed $8000 today for 1st time in last two months, ahead of the decision.

Lets discuss what is ETF and why the Bitcoin ETF matters for the whole cryptocurrency ecosystems.

What is the Exchange-Traded Fund (ETF)?

According to Investopedia - An ETF is a type of fund that owns the underlying assets (shares of stock, bonds, oil futures, gold bars, foreign currency, Bitcoin in this case) and divides ownership of those assets into shares.

It looks similar to mutual funds but it is quite different. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. You just need a demat account and you can trade ETF. A mutual fund NAV (Net Asset Value) is decided after the closing of the market, but ETF price is decided during market hours. A mutual fund can be purchased in fractions but you have to own ETFs in whole numbers. Usually investing in ETFs are cheaper than mutual fund investments.

What is Bitcoin ETF?

Let's understand the Bitcoin ETF meaning - The Bitcoin ETF will be the fund where the underlying asset will be Bitcoin. The Bitcoin ETF will provide the retail investors an opportunity to buy Bitcoin directly through the stock market, without actually owning it.

If you buy a Bitcoin ETF, then you don’t have to worry about its technical challenges like maintaining a Bitcoin wallet, buying Bitcoin and keeping it safe as well.

Why Bitcoin ETF matters for cryptocurrency community?

In spite of being one of the highest return invetsment assets, cryptocurrencies are still not part the mainstream invetor’s portforlio. The Bitcoin ETF can help to achieve this. It can help to increase the mass adoption of cryptocurrencies. That’s why the crypto community is more optimistic about it. The Bitcoin ETF approval can boost the Bitcoin price as well. Some market observers speculate that bitcoin ETFs could drive the Bitcoin price as high as $35,000.

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