The whole field of cryptocurrencies was going through a cold winter, so to speak. But now, it seems like things are changing once again. The field of cryptocurrencies is extremely volatile, and sometimes, keeping yourself up-to-date with the latest changes in the industry can be complex, to say the least.
This article will cover the outlook of Bitcoin in 2024, most of all in light of one of the newest pieces of news in the field: the spot Bitcoin futures ETF. Here is all you need to know about the crypto market and how the exchange-traded fund Bitcoin will factor into this market in 2024. If you’re interested in investing in Bitcoin without actually purchasing it or creating a wallet, these ETFs might just be the new way to go.
What is the Spot Bitcoin Futures ETF?
Bitcoin futures exchange-traded funds are normally defined as pools of bitcoin-related assets that are offered on traditional exchanges by brokerages to be traded as ETFs. The main goal behind this method is to give retail, as well as other investors, some crypto exposure without the need to own them.
ETFs are composed of assets that are related to Bitcoin’s price, and instead of being traded on a crypto exchange, they are traded on a traditional exchange. With the price of Bitcoin near eighty thousand, it is no surprise that this method could impact the field of cryptocurrencies as a whole, affecting the sol price and numerous other crypto assets. The assets within this system are Bitcoin futures contracts. These are legal agreements to buy or sell a specific commodity asset. These contracts are standardized for quality and quantity to facilitate trading.
How Do ETFs Work?
ETFs are created by purchasing futures contracts from the CME Group, and after that purchase, they are bundled into a fund. This fund is offered to investors who can buy it on an exchange, just like most other stocks or ETFs. After this, the futures contracts are actively managed as these ETFs were designed to make sure that as many people as possible are able to invest in Bitcoin without the necessary investments and complexities of buying this commodity directly.
This type of process also eliminates the need for some security procedures, as well as excessive funds. Moreover, thanks to ETFs, a familiar investment type is proposed without the complexities that would normally come with it.
The interesting part of this process is that ETFs are better understood in the world of investments than cryptocurrencies are. This is because it helps people who are only interested in investing in digital currency to do so without having to learn about other semi-related matters such as blockchain, decentralized exchanges, ledgers key storage and ultimately crypto as well.
Differences Between Spots ETFs and Futures ETFs
Spot ETFs are also known as physical ETFs, and they aim to track the price of Bitcoin by following and holding the cryptocurrency itself. They have not been approved yet, though. These ETFs are designed to provide investors with the benefit of direct exposure to the movements of Bitcoin’s price. They offer several benefits to investors, and they make their lives easier.
Future ETFs, on the other hand, are also known as derivatives-based ETFs. They do not hold the actual cryptocurrency. Instead, they operate by tracking the price of Bitcoin, using the aforementioned futures contracts, and by doing so, they facilitate the speculation on the future price of an asset without actually owning it. This type of ETF offers several advantages over spot ETFs, and they can be rather useful in volatile markets, as their traders anticipate a decline in Bitcoin’s price.