Before January 10, 2023, investors could only invest in Bitcoin directly through different exchanges. But now, there are two choices: direct investment and using Bitcoin Exchange-Traded Funds (ETFs). The US regulatory authority (SEC) has now given its approval for exchange-traded funds (ETFs) that directly invest in Bitcoin, marking a significant development in the US financial market.
Just like ETFs in India, which track indices such as Sensex or Nifty or commodities like silver or gold, spot bitcoin ETFs will trade on conventional exchanges in the US, mirroring the price/value of Bitcoin.
The US capital markets regulator approved 11 spot bitcoin ETFs, namely:
- Blackrock’s iShares Bitcoin Trust (IBIT)
- ARK 21Shares Bitcoin ETF (ARKB)
- WisdomTree Bitcoin Fund (BTCW)
- Invesco Galaxy Bitcoin ETF (BTCO)
- Bitwise Bitcoin ETF (BITB)
- VanEck Bitcoin Trust (HODL)
- Franklin Bitcoin ETF (EZBC)
- Fidelity Wise Origin Bitcoin Trust (FBTC)
- Valkyrie Bitcoin Fund (BRRR)
- Grayscale Bitcoin Trust (GBTC)
- Hashdex Bitcoin ETF (DEFI)
What this means is that now, investors can indirectly hold BTC (via ETFs) without any wallet. Earlier anyone who wanted to buy a crypto had to open a digital wallet or open an account at any crypto trading platform. This to many may seem like a very good way to invest in cryptos without the technical headaches of wallet, storage, security, etc.
But that said, this isn’t like betting or casino, which is more about enjoyment and occasional winnings when you invest via online casino and similar website.
In all honesty, common individuals might disapprove of frequent visits to casinos. However, for professionals in the field, it is akin to mastering an art or science. If you inquire, they can provide comprehensive insights into their approach. Yet, it’s best to let the experts pursue what they believe is most beneficial for them. For the majority of ordinary individuals, casinos represent an opportunity to test their luck and indulge in some leisure time. Distinguishing between gambling and investing is crucial, as they serve distinct purposes. Gambling provides a source of entertainment, offering inexpensive thrills and the potential for significant financial gains (if luck is on your side).
But coming back to the recent decision of ETF approval, it will definitely expand access to this cryptocurrency since both institutional and retail investors can now gain exposure to the world’s largest cryptocurrency without the need for a wallet to directly hold it.
Spot bitcoin ETF gives an easy and regulated alternative to add crypto exposure to long-term crypto investors’ portfolios.
To be fair, it is anyone guess as to what will be the impact of this ETF creation on Bitcoin price but if one has to make an educated guess, then it wont be wrong to say that this is indeed a watershed moment in Bitcoin’s evolution and the news of a regulated bitcoin financial product approved by a major financial regulatory like SEC will only add credibility to the digital assets and auger well for its long term, at least for those who look at Bitcoin as potential asset class of the future if not immediately.
In past though, the Bitcoin halving events have been important because it reduces the rate at which bitcoins are created as rewards for transaction verification. This event occurs approximately every ~4 years and historically the Bitcoin price tends to rally in anticipation. The next Halving event is scheduled for 2024 itself. You can read here about Bitcoin Halving 2024.
Indian investors as of today are allowed to purchase US ETFs directly via a domestic or international broker just like they invest in US stocks. So even the newly launched Bitcoin ETFs are accessible to them, though nuances around taxation of Bitcoin via this ETF route needs to be carefully assessed.