You have probably noticed that in the past few days, Bitcoin has been growing at an astonishing pace. In just 10 days, it jumped from $27,000 to $35,000! Moreover, there is a high probability that the growth will continue, and it will become even more interesting.
So, what is the reason behind this pump?
It all comes down to the potential approval of a spot Bitcoin ETF. It hasn’t been approved yet, but everyone is already excited as if it will definitely happen… So, while everyone is going crazy, let’s look into what a spot Bitcoin ETF is.
Bitcoin ETF (Exchange-Traded Fund) — is a financial instrument that simplifies investing in Bitcoin. It represents an investment fund indexed to the price of Bitcoin.
Bitcoin ETF allows investors to gain access to price changes in Bitcoin, bypassing obstacles such as dealing with cryptocurrency exchanges, creating a digital wallet, and storing Bitcoin on them.
Investors can buy and sell Bitcoin ETF shares on the exchange, similar to regular stocks. The price of the ETF is tied to the changes in the price of Bitcoin. If the price of Bitcoin increases, the price of ETF shares also increases.
In simpler terms, when you buy Bitcoin ETF, you are acquiring a piece of paper confirming your ownership of it, rather than the actual Bitcoin itself.
Similarly, on a regular exchange, you can buy gold where, in reality, you won’t possess a gold bar, but a piece of paper proving your right to ownership of that gold bar.
One of the key advantages of Bitcoin ETF is enhanced transparency and regulation. Traditional financial regulators will oversee Bitcoin ETF funds, ensuring compliance with established rules.
This additional level of control will provide investors with a sense of security and trust in the investment instrument. It will also give Bitcoin a more legitimate image, attracting more cautious investors.
Furthermore, Bitcoin ETF will open doors for institutional investors who are still unsure about direct investments in cryptocurrencies.
Institutional investors – are organizations ready to invest tens and hundreds of millions of dollars in instruments they see as profitable. Soon, Bitcoin ETF may become such an instrument for them.
Currently, many institutional investors are still wary due to regulatory uncertainties and obligations regarding the custodianship and trading of cryptocurrencies.
However, the introduction of regulated Bitcoin ETFs will allow these investors to gain access to Bitcoin through a financial instrument that meets their demands and risk management requirements.
The introduction of Bitcoin ETF also has significant potential for global cryptocurrency adoption. As regulators from different countries approve and include Bitcoin ETF in the list of assets on their exchanges, it will encourage broader participation from investors worldwide.
This global accessibility and recognition of spot Bitcoin ETF will contribute to the legislative establishment of Bitcoin as an asset class, fostering its long-term growth and of the entire cryptocurrency industry.
However, Bitcoin ETF is still Bitcoin, so all the inherent risks associated with cryptocurrencies remain in place — increased volatility, unpredictability, and price manipulation. It’s just that investing in Bitcoin will scare people less.
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What is Bitcoin ETF and why is it causing such insane growth? was originally published in The Dark Side on Medium, where people are continuing the conversation by highlighting and responding to this story.