Since the advent of the Internet, revolutionary technologies disrupted a whole lot of ways industries go about their businesses, including an interaction between societies and behavioral patterns of mankind. Studies show that smartphone adoption’s compound annual growth rate is 24.3%, with social media adoption at 13% and industrial robots 10.9%. It only goes to show the rapidity of technological adoption has been swift and sweeping the past decade.
Innovations also took the financial world by storm. Cryptocurrencies and blockchain technologies were the loudest buzzwords. Many financial experts are now working on the possibility of merging two of the latest in innovation – ETFs (exchange-traded funds) and cryptocurrency. Cryptocurrency ETFs will still yet to be approved by the SEC due to the high crypto market volatility. But once it gets the green, ETFs will be given direct access to invest in core digital assets, giving investors more control. Putting the top cryptocurrencies in one crypto ETF basket would have their prices tracked on an exchange within a specified period.
In 2019, the US ETF became the biggest ETF market in the world, with 1,988 products and assets worth $3.4 trillion. The crypto ETF products are nowhere near yet as only a handful are available and still to be approved by SEC. There is a strong sentiment, however, that a Bitcoin ETF may yet be the first to get a regulatory nod come 2021. Meanwhile, the nearest to a Bitcoin ETF is the Bitcoin Investment Trust (GBTC), owning bitcoins representing investors and trades shares of the trust. Once the Bitcoin ETF hits a US exchange, subsequent crypto regulations will trigger investments to flow into the digital asset market, advancing the industry towards massive cryptocurrency adoption.
As with any exchange-traded funds, a cryptocurrency ETF works the same. A cryptocurrency ETF is there to track one or more digital tokens when standard ETFs are tracking indices or baskets of assets. The tokens would also be traded like a common stock in the exchange subjected to price fluctuations all through the day while investors trade, buy, and sell.
The cryptocurrency ETF managing company would have to own a stake of each of the digital assets that it is tracking. Commensurate ownership of the tokens will be represented as shares that investors will be buying and have indirect ownership. They will have the advantage of gaining from any potential the token might achieve in the market.
Due to the issues of security and volatility, wary investors are aiming for ETFs to be able to try their hands in the crypto apace. They want to take advantage of what coins and tokens are promising them, while cryptocurrency ETFs take care of security and management. When wallets and exchanges are risky enough to be hacked, the cryptocurrency ETF will leave investors their funds adequately tucked with the custodian that protects the ETF.
One more advantage that cryptocurrency ETFs can present is that it can track different tokens at once. Without it, investors will have to contend with having to operate multiple accounts and wallets among the different crypto exchanges.
As of the moment, we still see the cryptocurrency market as volatile as ever and with scams and frauds interrupting the growth of the novel asset market, we do not see the Securities and Exchange Commission giving cryptocurrency ETF a much-sought-after approval.
But even without successful lobbies, cryptocurrency ETF launches are never ceasing. The Chicago Board Options Exchange is making efforts to open one. The Winklevoss Twins of Gemini Exchange have a petition in waiting to approve a Bitcoin ETF. Coinbase is also trying via a small-scale ETF-like index funding that hopes to become a full-blown cryptocurrency ETF. European and Asian markets are rather more open to cryptocurrency ETFs based on different regulations which we can see thriving.
In the meantime, US investors will need a little more patience.
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