Crypto ETF : Pros and Cons.

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Hello friends, welcome back to this space, it feels good to have you here once again. I trust you got value from my last post. Anyways am here again to dish out something nice. It's actually more like a continuation of what we have been discussing.

We started from CFD's, then we moved into comparing it with ETF and today we want to touch on the pros and cons of crypto ETF. I just hope you have an insightful time going through my post today. Let's get into it right away guys.

Pros of Crypto ETF

• Accessibility: Many traditional investors have been looking to gain access into the crypto world but then, they are just afraid of the risk associated with dealing with crypto but now with ETF they get to enjoy the benefit crypto affords without even holding it in it real form. When the underlying crypto asset performs well, they enjoy the benefit as well. They do not need to set up wallet or hold keys they can't manage. This helps reduce their risks and exposures.

• Simplicity: The ease that comes with buying shares in an ETF is far more easier and convenient when compared with buying and holding the crypto (underlying asset) itself. There are so many things to consider when buying and holding, you would need a wallet, an exchange and other related stuffs. All of these are not needed when you trade your shares in crypto, you only need your brokers account to carry out transactions.

• Liquidity: ETF seems to have more advantage when it comes to liquidity because they are traded on traditional exchanges which are known for high liquidity. The reason is not far fetched, people gain more access to traditional exchanges more than they do with cryptocurrency exchanges, this could be due to the technicality involved.

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With high level of liquidity here, investors can buy and sell ETF shares anytime they like as long as it is within the opening and closing hours of the market.

• Security: Security is one of the major advantages you enjoy when you own ETF shares, it unlike the risk you're exposed to when you actually buy the crypto asset and store on exchange or when you are given your key and then eventually lost it.

So many things could actually happen, one's wallet or exchanges could be hacked which makes you loss the asset forever. ETF doesn't require that you own the cryptocurrency, Nah! Neither does it expose you to hacking or theft like crypto does.

• Diversification: Considering buying ETF shares is a form of diversification, as you have indirectly ventured into the world of crypto using a traditional exchange, your portfolio now contains underlying crypto asset.

In a general point of view, diversification helps spread risk and reduce the impact of poor performance of an asset on the overall asset in your portfolio. In order words, if one asset is under performing, the others can help reduce the effect of it poor performance.

Cons of Crypto ETF

• Tracking Discrepancies: From our definition of crypto ETF we can deduce that it's helps track the performance of a crypto assets also referred to an an underlying asset. Now one of the downside is that sometimes the performance tracking is not always accurate due to factors like rebalancing, expenses and tracking errors.

• Regulatory Risk: when it comes to regulation, it varies from country to country, what is obtainable in one country as touching the rules guiding crypto may not be in another country. This in itself is a kind of limitation to the use of ETFs because change can occur anytime that my affect an already existing standard.

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• Diversification Limitations: It is true that diversification helps spread and caution risk especially when it has to do with an under performing asset but then what happen when the whole market is affected? It means everything will be affected. In spite of the fact that most crypto ETF offer diversification, they are still subject to the overall crypto market state and conditions.

• Fees: from findings, it has been discovered that buying a cryptocurrency directly is way more cheaper than buying shares of ETF. It's always a one time payment when buying a crypto asset directly on an exchange and it's usually very low compared to the other. If you're buying a share of an ETF, you get to pay a brokerage trade fee and the funds expense ratio which ranges typically between 0.39% - 1.5%

• Limited Trading Hours: Crypto ETF do not support trading round the clock, I mean 24/7 like the crypto market. ETF are traded on traditional exchanges which have an opening and closing hours in which buying and selling can takes place. This alone is a kind of limitation to those who look to take trading opportunities in certain time of the day.

Bottom Line

I believe by now you have a very good knowledge of what ETF means and it various pros and cons. Having learnt all of this, one should be able take informed decision.

There you go friends.I would love to wrap it up at this juncture. I want to believe you've gotten so much from this piece. As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.

Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!

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^{Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.}

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Regards
@lhorgic♥️

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