Investing in bitcoin can be a lucrative option for some but there can also be several
reasons for potential investors to shy away from it due to negative public perception including its historical use, poor regulation, and unorthodox existence. The largest barrier to entry being the underlying assets lack of regulation, making it next to impossible for institutions to get exposure. A Bitcoin ETF (exchange-traded fund) does away with the need for taking those risks and makes it safe to invest in the ‘wild west’ of digital currencies by protecting your investment being that these institutions can invest as they do any other regulated product. You can, therefore, buy bitcoin ETFs, invest in the new markets, and keep your investments safe from any unknown factors.
This differs from other Bitcoin ETP’s (exchange traded products) which is a collective term to include ETN’s ETC’s and ETF’s. It’s important to note that these different products behave differently and that has a great knock on effect with Bitcoin based products, for example; while ETNs (exchange traded notes) are typically traded with confidence in regulated markets such as precious metals, this is because the underlying assets themselves are also fully regulated. Which in normal markets can allow for derivative risks in the form of counterparty leverage for greater returns.
The Bitcoin ETF grants that extra confidence by being fully custodied and centrally cleared with no counterparty risk at all.
The world of cryptocurrency is exciting, but it’s still in its infancy. While sourcing Bitcoin can be achieved by mining it or using third party/unregulated exchanges, there are inherent risks and processes that most investors are not willing to take. Bitcoin ETFs can be the solution to that by minimising risk while investing in this new market.