Spot Bitcoin ETFs: Why Are They Such A Big Deal?

In this article, you'll learn everything you need to know about spot bitcoin ETFs, potential opportunities and if are they such a big deal

By Claudio Pires
Updated on December 14, 2023
Spot Bitcoin ETFs: Why Are They Such A Big Deal?

Spot Bitcoin ETFs are the latest buzz on the internet, and many investors and crypto experts have praised them. ETFs are currently the most awaited improvements in the cryptocurrency industry, as they’re supposed to open the sector’s opportunities vastly. Moreover, the upcoming approvals for ETF projects by the SEC have affected the price of Bitcoin by boosting it in a short period. In this article, you’ll learn everything you need to know about spot bitcoin ETFs, potential opportunities and if are they such a big deal.

However, some are wondering if these ETFs are really worth the fuss because, after all, they’re still not entirely used due to regulation challenges. They’re also prone to crypto volatility and market risk since they’re new assets with no proper technical development, but they’re a better way to get assets than learning how to buy Bitcoin on Binance

On the other hand, investors are excited to use them, so they’re eager for the official institution to approve ETF projects. Indeed, they’re more convenient than other crypto products and are more liquid, but we should still be careful with how we use them to diversify our portfolios.

Here, we’ll briefly explain what all the fuss is about.

The beginning of ETF popularity

ETFs have only recently begun trending on the market and in the crypto community, but they’ve been a thing for years now. We’re not talking about regular stock ETF, but crypto ETF. The first application for this asset was by a company specialized in exchange-traded products around ten years ago. The project is to track Bitcoin’s price development through futures contracts.

The reason why the project’s launch has taken so long was due to the SEC’s delay that has been elongated. However, many other BTC ETF projects experienced the same challenge since the body still sees cryptocurrencies and other similar assets as a threat to the financial system and investors’ portfolios.

However, the assets are now trending because the SEC started approving a few projects, meaning that more are expected to follow the same path. After the roaring success of BTC ETFs that sent Bitcoin’s price through the roof, crypto businesses started creating ETH ETFs, which haven’t had the same success, unfortunately.

The less talked about downside of spot Bitcoin ETFs

ETFs provided considerable exposure to the asset class, making investors aware of their opportunities. However, every new asset must be used with care and proper knowledge because ETFs are still a part of a highly volatile crypto market.

It is considered that investing in ETFs can lead to significant losses due to the difference between choosing long-dated versus short-term contracts. These two situations can differ from the spot price of Bitcoin, regardless of the moment you decide to buy or sell the ETF.

Another challenge is the expiration aspect of the futures contracts. For long-term investors, the underlying costs of the contract might hinder its value. Although the trade is already set for a specific time in the future.

Finally, tracking errors for spot Bitcoin ETFs might lead to a significant difference. Between the value of the cryptocurrency and the share cost of the spot. Market liquidity, management fees and delayed rebalancing will make it difficult for the ETF to be genuine in its approximations.

ETFs have indeed affected Bitcoin in some ways

Although they’re more of a tool that tracks Bitcoin’s price and can’t affect its dynamic,. An ETF can surely contribute to certain market shifts. For instance, the demand for Bitcoin ETFs can increase, automatically sending an inflow of investment to the cryptocurrency. Hence, the increased adoption can indirectly boost the price of Bitcoin over a limited period.

On the other hand, as ETFs are approved and then launched. Their impact on the market opens a new path for Bitcoin to reach mainstream financial institutions. Which contributes to increased investor confidence, therefore leading to a spike in Bitcoin prices. Even the trading activity can benefit from the approval of ETFs since day traders, for example, will reach more exposure.

Along with ease of use and tax benefits, Bitcoin ETFs seem like one of the best digital assets from the past years. Overcoming even AI input in the crypto sector and blockchain development. Keep reading to learn everything you need to know about spot bitcoin ETFs, potential opportunities and if are they such a big deal.

The future of BTC ETFs seems bright

The SEC is up to take action in approving promising ETF projects. Since their recent court ruling in regard to the Grayscale application has investors’ hope. Other major companies forecast a green signal for their projects somewhere at the beginning of 2024. The SEC is seemingly negotiating with businesses. Other official institutions since there have been considerable modifications to the requirement catalog.

However, the future of Ethereum ETFs is not that positive. Since their market penetration began, they’ve been under the shadows of the BTC ETF. These assets were already declining in value due to limited volume activity right as they debuted. Hence, many other ETFs included both Ethereum and Bitcoin underlying security to attract more interested investors.

Some experts believe that the lack of interest in ETH ETFs includes the underperformance of the cryptocurrency since the Merge. The latest upgrade has made a significant contribution to the asset’s sustainability. In addition, made the shift from PoW to PoS for increased efficiency.

Indeed, Ethereum might’ve taken some time to balance after the new update. Especially since more is coming, and there’s not enough time for the network to stabilize. However, it’s important for the blockchain to receive constant fixtures. Because, due to scalability issues, the ecosystem might not face the increasing number of users and transactions. Hence, the network might get congested, leading to too much waiting time. 

Unfortunately, these changes might affect Ethereum’s productivity on the market. So, for which spot ETFs are not the interest point for investors up to Bitcoin. The first cryptocurrency showed a steady development through the years, although it hasn’t really introduced updates as often as Ethereum. So, it has gained trust within a more extended audience.

Final considerations about spot Bitcoin ETFs

Spot Bitcoin ETFs are the most recent trend on the internet, with almost any crypto investor talking about them. They’re not only easy to understand but also offer exposure for owning Bitcoin without actually holding the asset. Which is safer and less volatility-prone. Therefore, the value of Bitcoin also increased due to a booming demand for these new assets bitcoin etfs opportunities potential.

Claudio Pires

Claudio Pires is the co-founder of Visualmodo, a renowned company in web development and design. With over 15 years of experience, Claudio has honed his skills in content creation, web development support, and senior web designer. A trilingual expert fluent in English, Portuguese, and Spanish, he brings a global perspective to his work. Beyond his professional endeavors, Claudio is an active YouTuber, sharing his insights and expertise with a broader audience. Based in Brazil, Claudio continues to push the boundaries of web design and digital content, making him a pivotal figure in the industry.