Could The ETF Wrapper Democratize Crypto Investing?

In the 28 years they’ve been around, ETFs have democratized asset classes that they wrap.  

It is said that the idea of ETFs was born from an SEC report dissecting the stock market crash of 1987.  The SEC concluded that if there was an exchange-listed instrument representing a basket of stocks that could be used as a hedge, a new ecosystem of liquidity would develop and alleviate pressure and volatility on the underlying securities during down drafts.  So, ETFs were essentially created as liquidity shock absorbers.  

The unintended benefits of this great innovation were the transparency and accessibility that ETFs brought to all asset classes and investment strategies.  

The ETF wrapper has allowed all levels of investors access to the likes of stocks in South Korea, bank loans, gold, and hedge fund strategies, with a brokerage account. In that easy accessibility, ETFs centralize and amplify liquidity as well as bring transparency and efficiency to costs and execution.  

The ETF wrapper will be no different in the world of cryptocurrencies and bring all these benefits to bear on one of the newest asset classes such as bitcoin (BITCOMP). This wrapper of the masses will bring accessibility, transparency, and liquidity to this new world.  

Before we dive in, our focus in this post is on the structure of investing in cryptocurrencies, not the underlying asset class itself. As we’ve covered in other blogs, bitcoin is a volatile asset and is not suitable for all investors. At minimum, it should be evaluated in the context of a diversified investment strategy. 

But clearly, investors are interested in gaining exposure to the asset class and the potential returns it can provide. We believe informed investors should be able to access bitcoin in their brokerage accounts in a secure, cost-efficient and user-friendly way, rather than accessing the asset in ways that have higher costs and risks, some of which are hidden.

With that said, let’s look at each benefit a little closer.

Accessibility

A theoretical investor has a few choices to buy bitcoin directly today. Many of our readers have already done so. Dedicated cryptocurrency ‘exchanges’ like Coinbase and Gemini are popular. Fintech firms, such as Robinhood and Square, have also enabled crypto trading in their apps. 

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Disclaimer: Investors should carefully consider the investment objectives, risks, charges and expenses of the Funds before investing. U.S. investors only: To obtain a prospectus containing this ...

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