Cryptocurrency Speculation

What are Crypto ETFs?

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Every investor involved with the cryptocurrency market understands how volatile it can be. While at one point, Bitcoin was worth $69,000, the next year it dropped to around $20,000. With the first whitepaper released in 2009, and two “crypto winters” fogging the landscape in the following 14 years, it’s clear that heavy price surges and dips are to be expected. 

That is why paying attention to the market trends is so important. For any investor, succeeding in such a volatile market can only be done if you remain aware of the patterns, and have the correct trading strategies to either take advantage or avoid losing out. This is why among other platforms is so integral to investor success, with guides, reviews, and regular price updates that need to be absorbed to complement decision making. 

These strategies can come in many forms. Some investors prefer hodling – which involves buying promising coins and holding onto them for years – day trading – which involves buying and selling quick – or even swing trading – where investors buy and sell within a matter of weeks or months, depending on how the market is taking shape. However, not every strategy will work for an investor, and this is part of the reason why crypto ETFs have become so popular over the last few years.

What Are Crypto ETFs?

Crypto ETFs act much in the same way as ETFs in the traditional stock market. Essentially, they are a pre-existing basket of assets which are tracked and traded over time – this could be a single cryptocurrency token or a number of different tokens. The share price mimics the movements of derivatives, meaning that an increase in futures contract prices will beckon an increase in the shares. 

What Are The Benefits?

The reason this has become such a popular choice for investors is because of what we mentioned earlier: there are a lot of strategies to choose from when investing in crypto for the first time, and all of them carry their own risks. That means that investors who want to get involved with crypto refrain from doing so, as they don’t want to pay the price of a token and risk losing the money they have invested into it. 

The cryptocurrency market is complicated, after all, and many investors don’t have the time to keep track of movement – which leaves them more at risk than those who do. With an ETF, however, crypto users are making passive investments. This means that investors do not have to spend all of their time analysing the market, as that can be left to professional market analysts who are outsourced through ETFs. 

The Bottom Line

As well as this, ETFs open crypto trading to far more people. While at one point, BTC and other altcoins could be bought by anyone with a few dollars, the prices have now skyrocketed, with BTC, especially, being unattainable to the majority – at least not without taking a hefty risk. Shares in crypto ETFs, however, are a fraction of the cost of purchasing actual crypto tokens. 

For instance, while BTC was moving between $30,000 to $70,000 throughout 2021 and 2023, the most popular ETFs were ranging from $6 to $10.50. This means that a substantial – but not extravagant – investment in ETFs back then would have given traders a significant return for a fraction of the initial cost. 

Of course, no investment strategy is without its faults. ETF shares will not be a like-for-like match with their tokens, there are ongoing fees for ETFs, and if you are excited about controlling your own crypto destiny, ETFs take it out of your hands. But overall, they can be a great option for certain investors. Just make sure you do your research and understand what works best for you before you invest!

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The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.

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