5 advantages of Bitcoin ETF approval
The approval of a Bitcoin Exchange Traded Fund (ETF) by the SEC on January 10 marks an important milestone in the interaction between traditional finance and the growing cryptocurrency market. This landmark decision by regulators provides an accessible and regulated avenue for mainstream investors and reflects public acceptance and recognition of cryptocurrency.
In this article, we will explore the 5 advantages of Bitcoin ETF approval, and bring you a better understanding of this historic breakthrough.
5 advantages of Bitcoin ETF approval: a historic milestone
The cryptocurrency world waited for this day with much excitement. But, many people may not have in mind the advantages of Bitcoin ETF approval. For that reason, we want to show you the 5 most important ones.
Advantage 1: Easy access to the market
Bitcoin ETF approval has provided new and convenient access to a wider range of investors to participate in Bitcoin. For most traders, investing in ETFs is much simpler than buying and selling cryptocurrencies in the traditional way, because when one invests directly in cryptocurrencies, one has to create a cryptocurrency wallet, find an exchange and go through all the buying and selling processes.
However, by investing in ETFs, investors do not really have to understand the intricacies of setting up a cryptocurrency wallet or blockchain technology, nor do they actually own cryptocurrencies. Instead, they gain exposure to cryptocurrencies by buying shares through a brokerage account (broker), which usually takes only seconds using their existing traditional financial account.
Advantage 2: Bitcoin's credibility is on the rise.
The approval of ETFs by the U.S. Securities and Exchange Commission (SEC) gives regulatory legitimacy to cryptocurrencies as an investable asset class, rather than as a speculative novelty confined to the realms of traditional finance. Despite Bitcoin's recent momentum as a nascent asset, many people remain skeptical about its future development. Bitcoin's significant price volatility has deterred some investors, even those who believe in its long-term potential, from participating in Bitcoin investments for fear of the risks.
The SEC's decision to approve the Bitcoin ETF carries substantial credibility derived from the regulatory authority it has accumulated over the years in securities regulation and investor protection, and is expected to instill confidence in the public regarding Bitcoin, potentially providing an underpinning effect for the future development of cryptomarkets.
Advantage 3: Guaranteed safety
Traditional Bitcoin trading occurs primarily on cryptocurrency exchanges. However, due to the reliance on self-regulation for platform security and the lack of external oversight, investors may face custody risks with the possibility of being vulnerable to hacking incidents.
Bitcoin ETFs significantly alleviate these two risks: large issuers managing ETFs can offer professional custody solutions, ensuring secure asset management; simultaneously, instead of buying and owning Bitcoin personally, investors choosing to invest in Bitcoin ETFs acquire shares in the ETF fund that tracks Bitcoin price movements, where, consequently, self-custody risk is eliminated.
Advantage 4: Low transaction cost
When cryptocurrency investors invest in Bitcoin through wallets or exchanges, the latter typically charge fees of 1% or higher. The SEC's approval of multiple ETF applications has triggered intense fee competition among issuers during the application process, which is seen as a positive for investors. Reducing fees and costs is crucial for major issuers to attract new assets.
In the days following the approval of Bitcoin ETFs, a "commission war" broke out among Bitcoin ETF issuers. Bitwise Bitcoin ETF (BITB) has the lowest expense ratio among all new Bitcoin ETFs, at 0.20%. Other funds followed quickly, such as Ark 21Shares Bitcoin ETF (ARKB), at 0.21%, and iShares Bitcoin Trust (IBIT), at 0.25%. Companies such as Bitwise have indicated that they may temporarily waive fees entirely for a period or when the asset under management reaches a certain level.
Advantage 5: Improved market dynamics
With the approval of the Bitcoin ETF, the demand for Bitcoin among a large number of investors keeps increasing. The rising price of Bitcoin will further encourage some investors to join the ranks of cryptocurrency investment. As a result, the whole Bitcoin investment sector gains more liquidity and becomes more prosperous.
Simultaneously, the approval of the Bitcoin ETF helps investors achieve greater diversification of their portfolios, incorporating Bitcoin into their investment strategies, marking the end of cryptocurrencies as a "novel" asset class and ushering in a world where cryptocurrencies can be part of all portfolios.
To a greater extent, as the traditional financial services industry now recognizes the long-term benefits of Bitcoin, especially as part of a diversified asset allocation, contributes to establishing a robust regulatory framework for digital assets, which accelerates the adoption of prudent regulations aimed at eliminating fraud and normalizing cryptocurrencies as a means of investment, payment and broader business operations.
These 5 advantages of the Bitcoin ETF approval offer security, confidence and new perspectives towards the Bitcoin world. As the weeks go by, we can surely add more, as we are facing a new milestone in the finance market in general.
You may also be interested in 👇
Deadlines for the approval of bitcoin ETFs
The Bitcoin ETF is similar to traditional ETFs, tracks the performance of Bitcoin and offers investors the opportunity to invest in Bitcoin without the complexities of direct ownership, such as managing a cryptocurrency wallet or navigating the cryptocurrency exchanges. Investing in a Bitcoin ETF has several advantages, such as accessibility, convenience, diversification, liquidity and professional management, which can attract institutional investors, increase liquidity and contribute to greater acceptance of cryptocurrencies as a legitimate asset class.
Cryptocurrency Arbitrage | What It Is and How It Can Be Done | 2024
Do you know about Cryptocurrency Arbitrage? It is a good way to earn money if you have 2 or more exchanges. Know what it is and how we can do it.
Ethereum ETF: the next step is in sight
The recent approval of Bitcoin exchange-traded funds (ETFs) by the SEC has sparked excitement in the cryptocurrency community, and investors have set their eyes on the potential of Ethereum, the second largest cryptocurrency in current market capitalization, making the Ethereum ETF the most anticipated focus in the coming months.
- 5 advantages of Bitcoin ETF approval
- 5 advantages of Bitcoin ETF approval: a historic milestone
- Advantage 1: Easy access to the market
- Advantage 2: Bitcoin's credibility is on the rise.
- Advantage 3: Guaranteed safety
- Advantage 4: Low transaction cost
- Advantage 5: Improved market dynamics
- You may also be interested in 👇