The concept of having spot Bitcoin transactions through exchange-traded funds (ETFs) seemed like a distant possibility back in 2013 when the Winklevoss twins first proposed an ETF that would track the price of the cryptocurrency.
Fast forward 10 years to 2024, and the United States Securities and Exchange Commission has finally given the green light to a handful of spot Bitcoin (BTC) ETF applications, submitted by a mix of both crypto-native and traditional financial institutions. However, the approval has raised questions about the distinctions between purchasing Bitcoin through a peer-to-peer transaction on an exchange versus investing in Bitcoin ETFs.
What sets owning Bitcoin ETFs apart from owning Bitcoin directly? Can ETFs also yield profits like Bitcoin? In Cointelegraph’s new video, “Legends & Myths about Bitcoin ETFs Debunked”, we debunk the most common misconceptions surrounding Bitcoin ETFs and provide answers to these questions and more.
Myth: A Bitcoin ETF is not the same as owning actual Bitcoin
There are distinct differences in ownership between Bitcoin and ETFs. When investing in a Bitcoin ETF, you are purchasing shares in the fund, not the actual Bitcoin itself. This means that you are subject to the fluctuations in Bitcoin’s price without direct ownership of the digital currency.
On the other hand, owning actual Bitcoin involves directly buying the digital currency and storing it in a digital wallet. This gives you control over the private keys and, in turn, your coins.
Fact: While a Bitcoin ETF tracks the price of Bitcoin, it does not grant ownership of actual Bitcoins.
Myth: Bitcoin ETFs guarantee profit just like Bitcoin
Contrary to popular belief, neither Bitcoin ETFs nor direct investments in Bitcoin offer a guaranteed profit. Both carry inherent risks, as the price of Bitcoin is highly volatile.
It’s important to note that a Bitcoin ETF simply mirrors the price movements of Bitcoin, meaning its value can fluctuate depending on market conditions. Before investing in a Bitcoin ETF or Bitcoin itself, it’s crucial for investors to conduct their own research and assess their risk tolerance.
Fact: Just like any other investment, Bitcoin ETFs come with risks and there is no guarantee of profits.
Myth: Bitcoin ETFs are as volatile as Bitcoin
Contrary to popular belief, Bitcoin ETFs do not necessarily have the same level of volatility as Bitcoin itself.
Bitcoin is notorious for its high volatility, resulting in significant price fluctuations in a short amount of time. However, since Bitcoin ETFs are traded on regulated stock exchanges, they may experience less volatility due to market mechanisms such as trading hours and the potential inclusion of other assets or strategies to mitigate risk.
Fact: While Bitcoin ETFs track the price of Bitcoin, their volatility can differ due to factors such as management fees and tracking errors.
Learn more about the misconceptions surrounding Bitcoin ETFs in Cointelegraph’s latest YouTube video, “Legends & Myths about Bitcoin ETFs Debunked.”
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