SEC is set to allow bitcoin futures ETFs to begin trading
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A huge win for the cryptocurrency sector, the Securities and Exchange Commission has approved the trading of the first U.S. Bitcoin futures exchange-traded funds. CNBC reportedFreitag
According to sources familiar with the subject told CNBCThe SEC won’t block futures-based Bitcoin ETFs that Invesco and ProShares have proposed. Bitcoin’s price rose after the news was spread. surged above $60,000
Experts recommend that investors understand all the possible risks of a bitcoin futures ETF, before you part with any money. These are some things to think about.
The ETF price will not be tied to Bitcoin
First of all, you need to know that investing in the futures-based Bitcoin ETF isn’t a direct way to invest in bitcoin.
Futures-based ETFs track futures contracts and not the asset’s price. A futures-based ETF for bitcoin would therefore track futures contracts and not bitcoin’s price. The ETF’s price will therefore not be the same as bitcoin.
The difference could pose a risk according to Ivory Johnson (certified financial planner, chartered advisor, and founder of Delancey Wealth Management), CNBC Make It. Futures-based bitcoin ETFs can be priced at a premium or at a discounted price during bull markets.
This difference in value is why an ETF-based on bitcoin futures “is more suitable for short-term exposure rather than long-term buy-and-hold investing,” states Todd Rosenbluth (director of ETF- and mutual fund research, CFRA).
Bitcoin supporters believe that direct investment in cryptocurrency could generate higher returns for investors. But it’s impossible to predict the future performance.
An ETF that is futures-based on bitcoin could help those who do not know how to purchase bitcoin or are uncertain of the best way to go about it. responsibility of protecting and securing their bitcoin walletIt is possible to buy bitcoin directly from the seller. Investors who buy bitcoin directly must be capable of coping with volatility.
It all comes down to how much you are willing to invest in futures-based ETFs or Bitcoin itself.
You will incur additional charges
An investor should be aware of the fact that investing in Bitcoin directly via a futures ETF can be much more expensive than investing directly. Because there are many options, additional costsAn ETF track can be attached to futures contracts, which may impact what investors end up paying.
Johnson also states that an ETF requires many intermediaries in order to invest, such as hedge funds or ETF providers. A few in crypto believe that ETFs are a good idea. would benefit these middlemen moreETFs are often more attractive to retail investors than those that trade at a premium in bull markets.
Raoul Pal, a crypto investor who was formerly a hedge fund manager, said that “Hedge funds… capture these returns.” tweetedThis Friday “Wall street gets richer. Retail investors lose. Yet again.”
Johnson claims that the middlemen take away the spirit of crypto assets. After all, the purpose of decentralized peer-to–peer networks, Johnson says, is to get rid of the intermediaries in traditional financial markets.
Exposure to crypto-currencies is risky
Last but not least, investors need to be aware that there are still risks of losing their investment.
Experts still consider the risk of exposure to a bitcoin ETF that is futures-based. Experts view this asset class as volatile, speculative and recommend that you only lose what you are able to afford.
The SEC’s Office of Investor Education and Advocacy tweetedOn Thursday, I advised that you weigh both the risks and the benefits of investing in bitcoin futures funds.
All investments in funds carry the risk of losing money. The high volatility and fluctuation of bitcoin (which means prices can vary widely) may increase this risk for bitcoin futures positions, the SEC stated in a postIn June
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