An ETF (exchange-traded fund) is an investment fund that tracks the price of an underlying asset or index. Today, ETFs are available for several assets and industries, ranging from commodities to currencies.
Cryptocurrency ETFs are exchange-traded funds that track the value of Cryptocurrency and trade on traditional market exchanges rather than cryptocurrency exchanges. They allow investors to invest in Cryptocurrencies without having to go through the hassle of using a cryptocurrency exchange while providing leverage to its prices.
A Cryptocurrency ETF would work the same way – the price of one share of the exchange-traded fund would fluctuate with the price of bitcoin. If the Cryptocurrencies increases in value, so does the ETF, and vice versa. But instead of trading on a cryptocurrency exchange, the ETF would trade on a market exchange like the NYSE or TSX.
Investing in a Cryptocurrency ETF provides leverage to the price of Crypto without having to learn about how Crypto works, having to sign up for a cryptocurrency exchange, and taking on the risks of owning Crypto directly. For example, bitcoins are held in a wallet, and if an investor loses the password to the wallet, their bitcoin is lost forever.
An ETF can hold more than just one asset. For example, A Cryptocurrency ETF could comprise bitcoin, Apple stocks, Facebook stocks, and more—providing investors with the opportunity to mitigate risk and diversify their portfolio. Similarly, by trading on a regulated market exchange, a Cryptocurrency ETF would provide investors with the chance to diversify their existing equity portfolios.
