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September 16, 2018, 02:14:38 PM |
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ETF is Exchange traded fund. Simply it works like that:
- price of ETF is changing the same as price of asset its based on - you buy 1 unit of ETF - fund managing this ETF has to buy equal amount of BTC and store them for you. - you sell 1 unit of ETF - fund managing this ETF has to sell equal amount of BTC.
So its price is not based on supply and demand from trading ETF but on price change of oryginal asset.
How will it affect price? Well all of those who would like to invest in btc but are scared to loose them due to hack or wrong transfer will be able to just buy it from his broker like gold or oil ETF. It will help not only big investors but even small investors to start invesing in BTC without any technical knowlegde. Its extra demand that will push price up.
How is it different from futures?
Futures price is based on supply and demand from trading futures. Its bet between two investors that in teory has no impact on supply and demand of oryginal asset (in fact those prices are fallowing each other because invesotrs are watching both prices knowing that they cannot differ too much and performing trades that makes them fallow each other). So its basicaly pulling money out of btc. How? Well everyone that has BTC but now want to trade on futures (no problem with storing, possibility to trade with laverage) will sell BTC and buy BTC futures. Selling btc will push price down buying BTC futures wount push up because this is separete supply and demand. ETF price is based on supply and demand oryginal asset and every transaction on ETF has to be created in equal amount by fund on oryginal asset because this fund earn on fees and dont want to take currency risk.
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