WHAT IS A BITCOIN ETF?
Before Bitcoin ETF, let me try to explain “What is ETF?”.
"They are basically types of investment instruments and are classified as securities. Most ETFs consists real-world assets such as oil, gold and other types of commodities. Investors who acquire ETFs are able to obtain certain asset without physical buying. For instance, instead of buying gold and storing it, with ETF you can easily buy an ETF that tracks gold. With this way, you can easily obtain the same return on investment without difficult procedures."
So what is a Bitcoin ETF?
A Bitcoin ETF would keep track of the bitcoin benchmark index while also replicating its performance, much in the same way as traditional ETFs do.“ This would let traders invest in Bitcoin (BTC), with the benefit of not dealing with procedures. Also ETF investors do not have to keep their BTC in a wallet etc. The types of Bitcoin ETFs proposed so far, like the Winklevoss Twins, an investor buying such an ETF, is buying it not directly. Instead of holding the cryptocurrency in their wallets, investors will have a porfolio.
How Will A Bitcoin ETF Affect The Price?
With Bitcoin ETFs, cryptocurrencies will be in the investor’s portfolio. Moreover, institutional investors will take a place in the cryptocurrency market.
A high number of market analysts believe that Bitcoin ETFs will increase adoption and that can boost the Bitcoin price.
Advantages of Bitcoin ETF
Diversification: "One ETF can give exposure to a group of equities, market segments or styles."
Lower Fees Compared to Managed Funds: "ETFs, have much lower fees when compared with the other funds. "
New Money: New investors will join to the market.
Confidence: With regulated brokers, investor's confidence will increase.
Disadvantage of Bitcoin ETF
Centrilization: Investing through an ETF do not suit the decentrilization philosophy of Bitcoin.
Market Manipulation: Because of shorting, market manipulation could be easier.
May Be Limited to Larger Companies: "Investing might be limited to larger stocks due to a narrow group of stocks in the market index. "
Bid-Ask Spread Can Be Large: "The more niche ETFs are created the more low-volume index could happen. This could result in a high bid/ask spread."
Sources:
https://www.investopedia.com/investing/bitcoin-etfs-explained/
https://www.coininsider.com/what-is-a-bitcoin-exchange-traded-fund/
https://hackernoon.com/an-in-depth-overview-of-bitcoin-etfs-81ddaa31de06