Are Bitcoin ETFs really important?

[Husires]

Disclaimer: The information's contained in this explanation is the result of my understanding of Fibonacci Retracement and may contain some errors. Search and confirm about it.

Table of contents

      1. Bitcoin ETFs
      2. Why do investors want a bitcoin ETF?
      3. Advantages of Bitcoin ETFs
      4. What are the Bitcoin ETFs that may be approved?

Source: https://www.forex.academy/what-does-the-introduction-of-bitcoin-etfs-mean-to-crypto-investors/

Bitcoin ETFs

We all believe that Bitcoin is the future, but its future success is not a guarantee, as there is no one who will guarantee your money if the price drops by 90% or more. Thus, when investors think of investing in such assets, they resort to mutual funds and exchange-traded funds, which usually own a variety of stocks, investments and other assets, which avoid these high risks.
 In the case of Bitcoin, the Bitcoin ETF is not available to US investors and the SEC's slowness in approving one may make investors apprehensive about investing in one of these digital currencies.

Bitcoin ETF will track the price of the underlying asset or index giving the user a price equivalent to that value but instead of trading on a cryptocurrency exchange or buying cryptocurrencies from brokers the ETF will be traded on an exchange like NYSE.


Why do investors want a bitcoin ETF?

Investing in Bitcoin ETFs combines two ideal parts of investing: ease of investing in an ETF, low exposure to risk (holding bitcoin, learning more about crypto, subscribing to unregulated platforms, not being able to buy large amounts or monetize them in a timely manner) and exposure to Bitcoin. Which is already volatile and yet makes quick profits.


Advantages of Bitcoin ETFs

• Diversification: You can invest in several assets at the same time. Instead of buying alternative currencies, you will be able to buy several shares of an unrelated nature.
• Legal compliance: Some investors are afraid of joining digital currency because it is not legal or guarantees tax compliance.
• Efficiency: Some investors are afraid to hold private keys or take those risks.

What are the Bitcoin ETFs that may be approved?

What are the investment funds that may be approved?

Grayscale, which holds $61 billion in digital assets, has announced that it will convert GBTC into an exchange-traded fund “when permitted,” meaning the Securities and Exchange Commission (SEC) is ready to approve the first Bitcoin ETF.

The timing is not random as it comes from some competitive pressures from Fidelity which is of the highest caliber in the industry.

In addition to the decline in the GBTC premium and some indications of investor confusion.
With more people ready to invest in cryptocurrency, the Securities and Exchange Commission (SEC) will have to speed up the process in accepting one of these applications.

source: https://academy.binance.com/en/articles/bitcoin-etfs-explained

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[Hydrogen]

Why do investors want a bitcoin ETF?

Its been said ETFs are more tax efficient than mutual funds. Countries with high taxes on investments, need ETFs the most to offset the greater cost of investing there.

I'm not an ETF guy who can explain reasons for this perfectly. I think the way it works is, mutual funds buy and sell stocks, which invokes a capital gains tax. While ETFs are more prone towards buying and selling securities to themselves, which avoids capital gains. Like I said I'm not an ETF guy. I could be in error here. As far as I remember that's how it works.

ETFs could also have a few tax advantages, which I'm not fully aware of.

Something like that would be the basic reason behind the popularity of ETFs as well as why the winklevoss twins have made many proposals for a crypto based ETF over the years.

[paxmao]

They are important due to regulations. Funds and investment firms are very much tied to their purpose, terms and conditions. Some of those restrictions affect which markets can they operate in, which assets can they buy, their maximum liquidity, the leverage and anything you can think of. ETF backed by bitcoin are a vehicle that may be used by many economic agents that cannot just go and buy bitcoin.

As individual investors, we are lucky we do not need these ETF, we got the real stuff.

Re tax advantages, yes, you can include ETFs in a few countries in tax efficient vehicles, but not bitcoin by itself.

[Darker45]

Not that important. Maybe important to some. But, again, not that important.

Anyway, I happened to have come across a series of tweets which started with John Carvalho tweeting, Good morning, nobody needs a Bitcoin ETF. There were nice arguments right there and so I might as well share it here also.


https://twitter.com/BitcoinErrorLog/status/1440996289655758853

To a certain extent, traditional products out of Bitcoin could be construed as betrayal of Bitcoin itself. Furthermore, Bitcoin does not need custodians.

[Poker Player]

For me, they are less important than they might seem. I do believe that if an ETF is finally approved in the US, it will drive the price up, driven by euphoria as certain institutions will have an easier time investing. But I don't think there will be much more money coming in than what is coming in via GBTC or investing in MSTR.

By the way, I understand that you made a mistake here:

• Diversification: You can invest in several assets at the same time. Instead of buying alternative currencies, you will be able to buy several shares of an unrelated nature.

That statement is correct when we talk about index ETFs, for example. You buy an S&P 500 ETF and you are buying a series of stocks or diversified assets from different sectors. But with a Bitcoin ETF you are only buying Bitcoin, not different assets.

[davis196]

Bitcoin ETFs being approved means large Bitcoin adoption among the institutional investors.This would be definitely bullish news for the market and a growing hype around Bitcoin.Maybe a new price bubble would be formed in the short term.
This means increased demand for Bitcoins and a higher Bitcoin price.Other than that,I don't see why Bitcoin ETFs should be considered "really important".I mean,the crypto industry is doing just fine without Bitcoin ETFs being approved.There was a huge hype around "will the SEC approve Bitcoin ETF" a few years ago,now it seems like nobody cares about this type of news anymore.

[avikz]

I have short and simple reasoning here.

Bitcoin ETF is not explicitly needed as bitcoin is built with a vision of removing intermediaries. People can buy bitcoin directly from an exchange or via p2p trade. However, there are a class of people who doesn't like to take the hassles of storing or transacting in bitcoin, yet want to have investment exposure. ETF is ideal for that class of people.

Now the second consideration is that if a bitcoin ETF is not backed by physical bitcoins, then it literally makes no sense because the money is invested into ETFs, are not coming to the bitcoin market. So generally we don't need bitcoin ETFs to be honest.

[mk4]

Not that important. Maybe important to some. But, again, not that important.

Anyway, I happened to have come across a series of tweets which started with John Carvalho tweeting, Good morning, nobody needs a Bitcoin ETF. There were nice arguments right there and so I might as well share it here also.

https://i.imgur.com/YZXLvoX.png
https://twitter.com/BitcoinErrorLog/status/1440996289655758853

To a certain extent, traditional products out of Bitcoin could be construed as betrayal of Bitcoin itself. Furthermore, Bitcoin does not need custodians.

The argument is pretty much "why need etfs when you can buy real bitcoin"; which makes sense, but it's totally forgetting the fact that there are a lot of old folks that are simply incapable of learning the ropes of owning "real" bitcoin. The easy solution for them would be to hold bitcoin on a reputable exchange, but that ain't much better. I'd say an ETF is better in that case.

[The Sceptical Chymist]

I like Carvalho's tweet "Abstract Bitcoin exposure is not an accomplishment".  That's true for individual bitcoin investors/owners, no doubt--the whole point of bitcoin is to have total control over your own money, right?

But for big institutions that want to invest in bitcoin and can't because they have so much money that buying it in huge amounts would either move the market or paint themselves into a corner (or both), ETFs can definitely be useful.  On the other hand, there are already bitcoin derivatives that those institutions could trade and get basically similar "bitcoin exposure", though I think an ETF would be a better vehicle for them.

Personally, I don't care if the SEC or whoever ever approves bitcoin ETFs, because I'd never invest in one.  Let the large investment banks, hedge funds, and all the rest of the big-money investors worry about its existence.  I'm going to remain content that bitcoin simply exists.

[cafucafucafu]

Really good thread, OP.

I personally think that it is completely overblown and people should not be putting their thought all in the ETF basket.

It's simply not productive. ETFs are a good way for institutions to access certain diversified investments, but you can probably do this just as easily on-chain with a contract or an exchange blended fund.

[el kaka22]

I would say that it is actually "not important" if you are in crypto already, if you are already making good investments and buying any crypto you want directly then it is not really that much of a big deal. You know why it is important only to few people? It is because bitcoin ETF would be great for people who are from USA and want to make a big purchase on bitcoin while saving from taxes. Consider how many people who owns or owned bitcoin, and consider how many of them fits that description.

However, bitcoin is such a volatile and weird thing is that even when china bans it 100th time we still drop in price. So, I would definitely assume something is up when an ETF gets approved. I would definitely consider that as a win for all of us.

[marine4u]

I think the Bitcoin ETF isn't really as important as one might think for speculation, it's just meant to better represent accepted value and become legit worldwide like GrayScale said bitcoin seems to be.  okay and asserts everything but it has a little bit of being perfect.  investors want, users want or don't want a bitcoin ETF, it certainly has a reason and bitcoin is still in the NFT cleft for inclusiveness that could change adoption

[ivankoh]

Is Bitcoin NTF Important for Bitcoin to Get Closer to Slaughterhouses? Yeahp  But it still has many advantages, investors will buy bitcoin through the NTF Secured Fund if the SEC approves, which proves that bitcoin will fail in terms of decentralization if minted into different secured funds without  no need to buy it on exchanges.  Lol

[mk4]

Is Bitcoin NTF Important for Bitcoin to Get Closer to Slaughterhouses? Yeahp  But it still has many advantages, investors will buy bitcoin through the NTF Secured Fund if the SEC approves, which proves that bitcoin will fail in terms of decentralization if minted into different secured funds without  no need to buy it on exchanges.  Lol

Surprise surprise, you can still continue holding your bitcoin in a non-custodial wallet even when we have an ETF. It's not one or the other; both self-sovereignty and centralization with investments can coexist.

[crwth]

Whether you support this or not, it will still be a part of the BTC journey. You can imagine it this way.

There's a future in there wasn't any Bitcoin ETF anywhere in the world. Bitcoin is still usable. Bitcoin ETF = Not that important to BTC
There's a future that there is a successful Bitcoin ETF somewhere in the world. Bitcoin is still usable. Bitcoin ETF = Not that important to BTC

Bitcoin ETF = Assurance for some by diversifying to the asset without owning the asset.

And to some who are not that tech-savvy to understand how to actually have BTC in their portfolio will benefit significantly with ETF's.

Let's wait for the future of this. They are probably taking their time with it.

[Lucius]

Are Bitcoin ETFs really important?

I would just say that crypto ETFs are something that is a logical sequence of events in the development of an asset. Some will say that such an instrument is completely unnecessary when it comes to Bitcoin and that it will do more harm than good in the long run, but this is completely irrelevant given that Bitcoin is decentralized and cannot resist becoming part of such trading.

If we take the price of BTC as the most important factor (for most investors), then the BTC ETF (in US) is very important because it will very likely result in a large amount of money flowing into the crypto market - which will then cause a significant increase in the price of BTC. On the other hand, some are afraid of the long-term consequences that could result from all this - and we all know what happens when guys from WS play with finances, usually the whole world pays a huge price for it.

In the context of the ETF, one interesting opinion.

Quote from: theymos https://www.reddit.com/r/Bitcoin/comments/97xa5s/andreas_antonopolous_etfs_are_not_good_for/
Quote from: healingpainter
Andreas Antonopolous: ETF's are NOT good for bitcoin as the centralized custodian can decide what to do with the bitcoin they're holding.

Agreed, an ETF will almost certainly turn into a disaster at some point. The coins will be stolen, forks will be handled controversially, there will be issues with fungibility (eg. someone will "trace stolen coins" to the ETF's stash), the world will freak out when a bunch of retirees lose their life savings after doing the equivalent of buying BTC at $20k, etc. etc. It'll also get the sort of people who love regulation more into BTC, which is never good.

But investors want it, so it'll probably happen eventually. In particular, I totally condemn trying to get regulators to interfere in the free market more than they already do by blocking any ETF. (When the SEC was last looking into this, I had actually written a long document that I was going to send to them in order to comment on many technical issues with their proposed Bitcoin ETF regulation, but I decided not to send it because I don't want to have even the slightest hand in regulations.)

An ETF probably will increase the price a lot (until the ETF suffers its near-inevitable catastrophe), which has some pros and cons.

Note that an ETF can't affect Bitcoin itself, just the ETF investors and the market. There is no voting of any sort in Bitcoin, so it's not as if holding a lot of BTC gives you any power over Bitcoin, for example. I do agree with Andreas that the creation of a "corpo-Bitcoin" seems probable, perhaps after the ETF loses a ton of BTC and wants to undo it.

Source

[aoluain]

Not that important. Maybe important to some. But, again, not that important.

Anyway, I happened to have come across a series of tweets which started with John Carvalho tweeting, Good morning, nobody needs a Bitcoin ETF. There were nice arguments right there and so I might as well share it here also.

https://i.imgur.com/YZXLvoX.png
https://twitter.com/BitcoinErrorLog/status/1440996289655758853

To a certain extent, traditional products out of Bitcoin could be construed as betrayal of Bitcoin itself. Furthermore, Bitcoin does not need custodians.

The argument is pretty much "why need etfs when you can buy real bitcoin"; which makes sense, but it's totally forgetting the fact that there are a lot of old folks that are simply incapable of learning the ropes of owning "real" bitcoin. The easy solution for them would be to hold bitcoin on a reputable exchange, but that ain't much better. I'd say an ETF is better in that case.

There are definitely people of the older generation who want part of the Bitcoin
action but dont or feel they dont have the means to take full custody of them.
People used to traditional investing will be used to traditional avenues
and tools like ETF's so there has to be an appetite for a Bitcoin ETF which as
posted above should increase Bitcoins exposure to a different audience,
one which has been standing on the sidelines ready to play.

[sana54210]

People need to learn the difference between "valuable" and "important". ETF is "valuable" to some people, do not take this valuable as money worth, like 100 million dollars value or that type of value, get it as valuable to have it existed type of deal. In this situation it is not important, important is food, it is shelter, it is love, it is friendship, it is job, it is income, it is surviving those are the important things in life, even politics is important.

However ETF is not important, what would happen if it never exists? Nothing would change in the world, not like it is some social problem that nations have, it is totally unimportant so it could never exist and we as humanity will be fine without it forever. However it is valuable, like a painting you put on the wall, is it a couch that you can sit? Is it the plate you eat from? Is it computer you need for work? Is it bed that you sleep? Of course not, those are more important than a painting on the wall, but there are many people that have paintings in their houses right? That is exactly what ETF is for the finance world.

[ndgo]

We do not need Bitcoin ETFs, we are the select few who know how to hold bitcoin. However, there are at least 6 billion people who don't know how to hold bitcoin. I feel like an ETF would help them out.

A physically backed bitcoin ETF would solve the grayscale monopoly problem, many many many tax problems, the traditional fidelity-style broker's problems, regulation problems. Heck the SEC could regulate bitcoin ETFs to hell and let crazies like us go wild on real bitcoins if they really felt like it. Same distinction as grain farmers vs grain futures traders.

On the people who don't know how to hold bitcoin, if you've been to r/coinbase or r/cryptocurrency and sorted by new you'd see 1/10 posts are people who got rekt or somehow lost all their coins or let someone steal everything out of shear stupidity, or sent 1 BTC to some random person who said they would send back 2 BTC. It's pretty hard to get rekt when you don't have access to funds. Somehow this leads me to say the type of person who needs a bitcoin ETF would also benefit from just owning robbinghood IOU bitcoins.

Futures backed ETF would be a buy the rumor sell the fact type story.

[mk4]

People need to learn the difference between "valuable" and "important". ETF is "valuable" to some people, do not take this valuable as money worth, like 100 million dollars value or that type of value, get it as valuable to have it existed type of deal. In this situation it is not important, important is food, it is shelter, it is love, it is friendship, it is job, it is income, it is surviving those are the important things in life, even politics is important.

However ETF is not important, what would happen if it never exists? Nothing would change in the world, not like it is some social problem that nations have, it is totally unimportant so it could never exist and we as humanity will be fine without it forever. However it is valuable, like a painting you put on the wall, is it a couch that you can sit? Is it the plate you eat from? Is it computer you need for work? Is it bed that you sleep? Of course not, those are more important than a painting on the wall, but there are many people that have paintings in their houses right? That is exactly what ETF is for the finance world.

I'd probably agree with you if you asked me this question sometime between 2016-2018. But right now in this fucked up economic situation? I'd say having bitcoin exposure in your total portfolio is absolutely important.