How Bitcoin ETFs Will Impact The Cryptocurrency Market

There has been a significant push for the approval of Bitcoin Exchange-traded funds (ETFs) by the crypto community. This is because they would bring a range of benefits to investors. So far, no ETF has been approved by the US Securities and Exchange Commission (SEC).

So what benefits will SEC-approved ETFs bring to the crypto market?

They will Make it Easier for Institutional Investors to invest in Bitcoin

Bitcoin ETFs are easier to invest in because they can be bought and sold using a standard brokerage account. As such, they would serve as an easy onramp for American institutions looking to invest in bitcoin without having to buy the underlying asset. Right now, Grayscale Bitcoin Trust has a near-monopoly in the US due to regulatory restrictions. Most major companies looking to have direct access to the cryptocurrency have to use the agency and pay a premium for the service.

In jurisdictions such as Canada, which has approved numerous ETFs, investors also have the choice of investing in short-selling ETFs, with the latest entrant being The BetaPro Bitcoin ETF by the Horizons ETFs Management Inc.

A SEC Bitcoin ETF Approval would Benefit Retail Investors

On the US side, there is still a lot of apprehension over bitcoin investments, but the recent influx of notable mainstream retail investors is likely to change matters. Right now, US citizens looking to invest in bitcoin have to hold the coins in a wallet. This raises a myriad of security issues that could lead to substantial losses. Losing the cryptographic key to a wallet or having it stolen are among the main security concerns that push away many mainstream investors. As such, an ETF would be able to address these issues.  

The other advantage of having an ETF approved is that most major US banks and financial institutions already have the resources to support ETF products. As such, Bitcoin ETF funds would also be invested under tax-free savings accounts (TFSAs) and retirement savings plans (RRSPs). The investment vehicles help to lower investment taxes for individual investors.

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