Let’s dig down on the differences between Bitcoin ETFs and Blockchain ETFs!
Even as the cryptocurrency bitcoin has gained traction within the investment community, bitcoin ETFs are relatively new. Blockchain ETFs have also made their debut in mainstream markets. As these two are new terms to many investors, before we look at the differences between Bitcoin ETFs and Blockchain ETFs, let’s back up a step and go over what these two funds are.
Definition of Bitcoin ETFs and Blockchain ETFs
Firstly, you need to understand the term ETF:
Simply put, ETF standing for exchange-traded funds is a tracking vehicle that provides a simpler alternative to buying and selling individual assets. By focusing on sustainability, ETFs allow investors to diversify their investments without owning the assets themselves.
As for Bitcoin ETF, this is an exchange-traded fund that tracks the value of Bitcoin and trades on traditional market exchanges rather than cryptocurrency exchanges. This allows investors to buy and sell bitcoin more easily and cheaply, smoothly integrate it into their portfolios, and eliminate the inconvenience of securing and storing bitcoin.
In the case of Blockchain ETF, it primarily tracks the stock market prices of companies that have invested in blockchain technology within the fund. Therefore, investors can invest more efficiently in a select basket of blockchain-specific stocks.
How are Bitcoin ETFs and Blockchain ETFs different?
To point out the differences between these two, we need to understand the instruments they track. While bitcoin is a cryptocurrency, blockchain is the underlying technology of a cryptocurrency. So, it’s no exaggeration to say bitcoin needs blockchain to operate.
Because of their current form, Blockchain ETFs are more stable when compared to the volatility of (hypothetical) Bitcoin ETFs. This is because they are not exposed to the fluctuation of bitcoin’s wild price swings.
Moreover, even bitcoin is now considered to be the largest digital currency, it is still facing many limited regulators in some countries. In recent years, bitcoin has been embroiled in multiple regulatory battles and have been scrutinized heavily, particularly for their role in facilitating criminal activities, such as money laundering. When they are launched, bitcoin ETFs will be directly affected by the policies of regulatory agencies regarding bitcoin and cryptocurrencies.
On the other hand, Blockchain technology and Blockchain ETFs are neither banned nor under scrutiny by regulatory agencies. Blockchain technology also won the approval of J.P. Morgan CEO Jamie Dimon and has been adopted by a wide swath of the financial services industry.
By breaking down the difference between Bitcoin ETFs and Blockchain ETFs, we saw a lot of appealing potentials of ETF. In the near further, this type of vehicle is promised to thrive even stronger.
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