Everything You Need to Know about Crypto ETFs – Will They Impact Crypto Exchange?

Bob John
August 30, 2023

 Today, the easiest and fastest way to purchase Bitcoin orany other tokens remains a crypto exchange like ours at Voltcoins, but youshould always be aware of market conditions that drive the prices - especiallythese days. We at Voltcoins encourage our users to stay updated with the latesttrends because such developments can have an impact on your holdings.

In July we witnessed increased attention to BlackRock’sBitcoin ETF plans, including a formal application with the SEC. How will thisaffect crypto prices? Let’s dive right in, shall we?


What’s an ETF?

An ETF, or exchange-traded fund, is a type of financialasset that combines the features of a mutual fund and a stock. It allows peopleto buy and sell shares representing a diversified portfolio of assets, such asstocks, bonds, or commodities.

ETFs are traded on stock exchanges, making them easilyaccessible throughout the trading day at market prices. They offerdiversification, as one ETF can hold a range of assets with differentqualities, reducing individual risks.

Additionally, ETFs are cost-effective thanks to lowerexpense ratios compared to mutual funds. This makes ETFs a popular choice foranyone looking for simplicity and flexibility. At first glance, this seems likean ideal alternative to a crypto exchange, but things are not always as blackand white as they seem.

Crypto ETFs vs. traditional cryptoexchange

Crypto ETFs allow you to access a diversified basket ofcryptocurrencies easily, offering simplicity and risk reduction. They are tradedon traditional exchanges, making them user-friendly for people who are moreleaning towards stocks.

On the other hand, a crypto exchange enables directownership of individual cryptocurrencies, providing more control over assets.Users can actively manage their digital assets and explore variouscryptocurrencies.

However, using crypto exchanges may involve complexities andsecurity risks, as users are responsible for protecting their private keys andwallets. That’s why we at Voltcoins do not provide wallet services, but ratherlet you have full control over where you store your bought crypto. Having saidthat, you need to make sure that nobody can access your wallet and that it’skept in a safe place.

Using an ETF comes with another drawback related to valuation.There can be a gap between the value of the underlying asset (in this case BTC)and the ETF price. Basically, it is possible that the value of Bitcoin willrise by 100% while the ETF will only rise by 90%.

Is this the new trend?

While an ETF listed on the US stock market is an importantstep forward for the industry, people will continue to rely on a cryptoexchange to make purchases for various reasons. Keep in mind that ETFs canprovide new liquidity into the industry, which is a tailwind for valuations,but on the other hand, it is still pretty much unexplored terrain. Also, notethat the BlackRock application is still currently under review and has not beenapproved yet, so it is too soon to tell where the ETF road is headed.

read more