SEC’s Approval of Bitcoin ETF and Its Impact on Bitcoin

Image of Bitcoins and cash

People have been speculating that you’d one day see a cryptocurrency on the Stock Exchange for years. And recently, it finally happened with Proshares Bitcoin Strategy ETF (ticker: BITO). The introduction of a bitcoin-linked fund is an important moment for the cryptocurrency and digital assets industry as a whole. It marks the end (or perhaps, the beginning of the end) for what has been a years-long wait for the U.S. Securities and Exchange Commission (SEC) to give the green light to a bitcoin-linked ETF.

 

If you’re still perplexed about what an ETF is, how it works, and why it’s important, read on to learn more about what an ETF is, how it affects bitcoin, what investors should know, and where things are heading.

What Is An ETF? 

ETF stands for Exchange Traded Fund. It is an investment fund that tracks an index, commodity, or other assets, which can be bought and sold on a stock exchange. The most famous ETF is the SPDR S&P 500 ETF, which tracks the S&P 500 Index, which recently reached a record high. By investing in that ETF, you can access the entire market, which is much more advantageous than tracking all 500 companies individually.

 

What is a Bitcoin ETF?

An ETF tracks the performance of a set of assets. As a result, a bitcoin ETF would track the price movements of bitcoin. If the price of bitcoin rises, so will the ETF’s value. When you invest in a bitcoin ETF, you’re not investing in bitcoin directly. You won’t own the asset. Instead, you’ll be investing in the future performance of the asset. Bitcoin ETFs may be even more appealing to those who don’t want to deal with the complicated business of investing in bitcoin directly; after all, one must follow some security and storage measures to invest in the cryptocurrency.
An ETF removes this requirement. The other advantage is that ETFs are already broadly understood. If you have experience investing in ETFs, then investing in a bitcoin-linked ETF will be more straightforward than investing in the currency directly.
ETF stands for EXCHANGE TRADED FUND.

 

The Impact on Bitcoin

We’ve already seen the impact of news on bitcoin. Since the announcement, the price has significantly increased, coming within 1% of its all-time high. The price may stabilize in the coming weeks and months, but the early signs are positive and unlikely to disappear entirely.

 

The ETF makes it easier for large institutional investors to invest in bitcoin, which makes the digital currency more accessible. It also gives the coin an extra dose of legitimacy. While it might not change the approach of individual investors, they will feel the impact on their portfolio.

 

What Have Other Countries Approved Bitcoin ETFs

The United States isn’t the first country to approve bitcoin-linked ETFs. Canada was the first to do so, back in March. Australia is also looking into it, with an announcement expected soon.

 

Final Thoughts

It’s little wonder that Bitcoin’s price surged following the announcement. This, after all, is something that many people have been waiting for many years for, and it marks the beginning of a new chapter in the world of cryptocurrencies, and finance in general.

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