The year was 2013 when the Winklevoss twins first sought approval for an exchange-traded fund (ETF) that would track the price of Bitcoin. At that time, the idea of conducting spot Bitcoin transactions through ETFs seemed like a distant dream. Fast forward to 2024, and the United States Securities and Exchange Commission has finally given the green light to a series of applications for spot Bitcoin ETFs. These applications came from a mix of crypto native and traditional financial institutions. However, the approval of these ETFs has raised questions about the differences between buying Bitcoin on an exchange and investing in Bitcoin ETFs.
To address these questions and debunk common misconceptions, Cointelegraph has released a video titled “Legends & Myths about Bitcoin ETFs Debunked”. In this video, viewers can find answers to questions such as whether owning Bitcoin ETFs is the same as owning actual Bitcoin, and whether ETFs offer profits similar to Bitcoin.
One of the myths surrounding Bitcoin ETFs is the belief that owning ETF shares is equivalent to owning actual Bitcoin. However, there is a distinction in terms of ownership. When investing in a Bitcoin ETF, individuals are purchasing shares in the fund rather than the actual Bitcoin itself. This means that investors are exposed to the price movements of Bitcoin without directly owning the digital currency. On the other hand, owning actual Bitcoin involves purchasing the digital currency and storing it in a digital wallet. This grants individuals control over their private keys and, consequently, their coins. The fact is that while a Bitcoin ETF tracks the price of Bitcoin, it does not provide ownership of actual Bitcoins.
Another myth surrounding Bitcoin ETFs is the belief that they guarantee profits just like Bitcoin. The reality is that neither investment offers a guaranteed profit. Both investing in a Bitcoin ETF and directly in Bitcoin come with risks due to the highly volatile nature of Bitcoin’s price. Investors should conduct their own research and assess their risk tolerance before investing in Bitcoin ETFs or Bitcoin itself. The fact is that Bitcoin ETFs, like all investments, carry risks and do not guarantee profits.
There is also a misconception that Bitcoin ETFs are as volatile as Bitcoin. While Bitcoin ETFs are designed to track the price of Bitcoin, they may not perfectly mirror its fluctuations. Bitcoin is notorious for its high volatility, leading to significant price changes within short periods of time. However, a Bitcoin ETF, being traded on a regulated stock exchange, may experience less volatility due to market mechanisms like trading hours and the possibility of incorporating other assets or strategies to mitigate risk. The fact is that the volatility of Bitcoin ETFs can be different from Bitcoin due to factors such as management fees and tracking errors.
For more information on the misconceptions surrounding Bitcoin ETFs, viewers can watch Cointelegraph’s YouTube video titled “Legends & Myths about Bitcoin ETFs Debunked”.