Why are Bitcoin ETFs sought-after on the cryptocurrency market?

The latest Bitcoin craze is divided between the fourth halving and ETFs (exchange-traded funds), which have propelled the price to the moon. The positive sentiment surrounding Bitcoin contributed to the rising prices, especially with the introduction and approval of BTC ETFs.

But what’s the deal behind these magical assets? Considering how much it took for them to become popular due to regulatory uncertainties, ETFs should’ve been long gone. However, something made investors be patient and wait to use them for portfolio investment and diversification. In the end, it paid off.

ETFs made approaching Bitcoin much more accessible than investing or trading it. Hence, if you want to buy Bitcoin for exchange-traded funds, Binance data shows you’ll be able to leverage its value without owning it entirely, which lowers volatility and cybersecurity risks. So, let’s find out what’s so unique about them.

Generally, ETFs are pooled investment securities that act like stocks but contain plentiful securities. In Bitcoin’s case, ETFs include related assets that allow investors to receive exposure without jeopardizing their portfolios.

As with most ETFs, BTC assets must be registered, which is why numerous projects have received applications to the SEC (Securities and Exchange Commission) since 2013. However, the first BTC ETFs were approved in 2021, with the rest of the approvals to be dealt with in 2024, the same year as the halving.

BTC ETFs are considerably advantageous for investors, regardless of their experience, because they eliminate the need for going through several steps and procedures of acquiring ETFs or Bitcoin alone. For instance, to own Bitcoin, you need to own it, store the wallet key safely and 

choose the right storage for the asset, which isn’t necessary with ETFs. Hence, having BTC ETFs ensures more safety and exposes you less to hacks, which can happen in the crypto market.

When it comes to costs, getting Bitcoin may not be easy since its prices are constantly rising, so even getting an insignificant part of it can pose difficulties. BTC ETFs, on the other hand, allow you to buy related assets within your budget and risk tolerance while achieving your investing goals.

Another factor that makes ETFs approachable involves their simplicity. As a beginner, you don’t have to get into mining, decentralization and cryptocurrency to be an investor when choosing BTC ETFs because it’s easier to understand as a concept and can be traded relatively easier than the actual token.

BTC ETFs have numerous reasons for being so popular recently, but they’re not perfect. For example, there’s a significant discrepancy between Bitcoin’s price movement and the ETF’s productivity on the market due to management fees or logistic issues since they can be procured from traditional exchanges. Hence, it may happen for the ETF’s value to be considerably lower than Bitcoin’s real price movement, which can be confusing.

BTC ETFs are newly approved for use on the market, so their liquidity is scarce, which can contribute to increasing prices of buying and selling ETF shares. So, BTC ETFs might be overpriced and may have driven themselves into an overrated market demand.

On top of these two elements that affect their prices, ETFs are prone to regulatory uncertainty. Considering they’re seen as cryptocurrency-related assets, the SEC and similar institutions don’t trust their reliability, which is why they are trying to implement new regulations.

One of the main reasons why people have gone crazy about BTC ETFs is their contribution to one’s portfolio. Leveraging this asset can help diversify the return profile, and some believe it can combat inflation, so it would be best to allocate from 1% up to 5% of BTC ETFs in a portfolio, which is inspired by the 60/40 strategy. Choosing this asset also ensures a more cost-effective way of improving a portfolio’s value over time.

It may also be possible to build an all-ETF portfolio to lower expense ratios, increase performance and get exposure to alternative classes and currencies. According to past performance and AUM numbers, investors can choose the right type of ETF for their risk management condition.

Allocating funds in such a portfolio should include fixed-income ETFs or equity ETFs for better dividends because, in this case, allocation is more important than timing the market. Monitoring is essential, especially for elements like tracking errors or taxing.

As a beginner, it would be best to follow the ETF assets from reliable companies that have received approval and are continuously growing and improving. Among these businesses we can recall as innovative are BlackRock and Fidelity, which have recently exploded on the BTC ETF 

craze.

These companies are part of the “Newborn Nine” group of ETFs that deal with Bitcoin and have been approved by the SEC. BlackRock has a significant number of ETF offers and an impressive AUM, while Fidelity is closely following.

Other companies to check out include the following:

• Vanguard is owned by the shareholders’ funds;

• State Street provides international exchange services;

• Invesco offers mutual funds and retirement plans;

• Charles Schwab has wealth management services;

Up to this moment, BTC ETFs increased in value considerably due to the general positive investor sentiment. But how long will it take until their popularity will cease? Well, while we can’t make accurate predictions on BTC ETFs, it may be possible that the halving will contribute to more projects being approved so investors can access a varied number of interesting investments. Hence, BTC ETFs will most likely continue to rise and improve the market for a few years, especially since Bitcoin’s value is supposed to grow.

Bitcoin is the most successful cryptocurrency, and it has become a staple on the market. Considering its emergence and value, it has been associated with ETFs and created a new asset category that’s profitable and safe. Although investing in BTC ETFs doesn’t expose investors directly to it, its underlying value has a massive potential to become a leader in the crypto market.