Bitcoin ETFs, or Exchange-Traded Funds, are investment vehicles that track the value of Bitcoin and are traded on traditional market exchanges rather than cryptocurrency exchanges.
This post will explain why investors need to buy and hold Bitcoin ETFs. Before then, let’s learn more about Bitcoin ETFs.
Types of Bitcoin ETFs
There are two main types.
- Bitcoin Futures ETFs: These funds invest in Bitcoin futures contracts rather than holding actual Bitcoin. Investors gain exposure to the cryptocurrency’s price movements without owning the digital asset directly. Bitcoin futures ETFs issue publicly traded securities tied to the price of futures contracts.
- Spot Bitcoin ETFs: These ETFs pool investor money to purchase actual Bitcoin directly. Managed by investment firms, spot Bitcoin ETFs are listed on traditional exchanges, providing an accessible way for investors to gain exposure to Bitcoin’s price movements in their regular brokerage accounts.
Why Buy & Hold Bitcoin ETFs
Investing in Bitcoin ETFs presents several advantages for long-term investors:
- Diversification: Including a Bitcoin ETF in a portfolio aids in risk distribution due to Bitcoin’s low correlation with traditional assets like stocks and bonds, enhancing overall portfolio resilience and stability.
- Liquidity and Convenience: Bitcoin ETFs offer improved liquidity and easier diversification compared to holding the cryptocurrency directly. They are accessible to a broader range of investors, lowering barriers to entry and simplifying the investment process.
- Cost Implications: While Bitcoin ETFs come with management fees and operational costs, they open up the opportunity for long-term investments in Bitcoin without the complexities of holding the cryptocurrency directly.
- Risk Mitigation: Incorporating Bitcoin ETFs can aid in mitigating the volatility associated with direct cryptocurrency holdings, providing a more stable investment environment for long-term strategies.
Conclusion
Investors need to do proper research and conduct investigations before putting their money into crypto endeavours.