Can someone please ELI5 what is spot Bitcoin ETF that BlackRock is trying to...

[a298b112]

Can someone please ELI5 what is spot Bitcoin ETF that BlackRock is trying to get registered? I mean if one can buy BTC from an exchange why there is a need for a spot BTC ETF?

[_act_]

I mean if one can buy BTC from an exchange why there is a need for a spot BTC ETF?

It is like saying 'why is derivative trading (future contracts) trading existing on crypto exchanges when there is spot trading on the same exchanges.

Bitcoin ETF goes beyond crypto exchanges, it is also existing in other trading platforms that support bitcoin derivative trading.

With bitcoin ETF, you do not need to buy bitcoin directly, but buy it using future contract.

But for investment, it is better to buy bitcoin directly rather than to use future contract to buy it. But some people prefer to use leverage to trade, those people can go for derivative trading.

[YOSHIE]

Can someone please ELI5 what is spot Bitcoin ETF that BlackRock is trying to get registered? I mean if one can buy BTC from an exchange why there is a need for a spot BTC ETF?

The trading method in ETF features as opposed to BTC which is in common exchanges in general, that's what attracts people and requires, in addition to low prices, fast price movement to make profits.

Example: which is often traded in ETF features, such as: BTCDOWN and BTCUP.

BTCUP aims to make multiple profits when the price of Bitcoin goes up. Meanwhile, BTCDOWN aims to provide multiple benefits when Bitcoin prices fall.

Well, the quote above, that made them choose ETFs, as an option for everyone, including me, in trading.

[Maus0728]

You need to understand what the spot BTC ETF is. Consider a bitcoin ETF as an alternative way to purchase bitcoin without storing it in a hot or cold wallet; yet, it still has the potential to make or break your finances depending on the volatility of the bitcoin price. Like the gold ETF, you have a digital record that permits you to claim on a fund backed by physical gold but you actually does not own any gold.

Back to the question of why there is a need for a spot BTC ETF?

I mean if one can buy BTC from an exchange why there is a need for a spot BTC ETF?

So the question why not invest in bitcoin in the first place? One  reason I can think of is the hassle and availability to almost everyone.
- As an avid Bitcoin holder, buying and storing a fraction of cryptocurrency during my early days in crypto was quite cumbersome. You need to register in a centralized exchange, you need to know the technicalities of what bitcoin wallets are and how to protect them, the nitty gritty on how to save some fees during transactions or any other hassle that a newbie needs to go through to have their own piece of the pie.

Now with spot BTC ETF, you can have your bitcoin without worrying about all the hassle I mentioned above. You can just buy or sell them like a traditional stock. With the current issue by BlackRock, I am not sure how thing pans out, but Bitcoin ETF could be available to traditional brokerages like Fidelity or Ameritrade.

[a298b112]

Consider a bitcoin ETF as an alternative way to purchase bitcoin without storing it in a hot or cold wallet; yet, it still has the potential to make or break your finances depending on the volatility of the bitcoin price.

So when you buy bitcoin ETF from BR, will BR go to the market and buy BTC and keep it for you? Or there is no real BTC at all and bitcoin ETF is just tracking BTC price?

[Maus0728]

will BR go to the market and buy BTC and keep it for you? Or there is no real BTC at all and bitcoin ETF is just tracking BTC price?

Yep, according to blackrock, they claimed that they have a partnership to coinbase that is responsible for their bitcoin custody. And yes that they are basically tracking bitcoin prices!

[348Judah]

Can someone please ELI5 what is spot Bitcoin ETF that BlackRock is trying to get registered? I mean if one can buy BTC from an exchange why there is a need for a spot BTC ETF?

This makes you have bitcoin just as the exchange traded funds, it's present bitcoin as been mentioned as securities asset being approved by the government to use and be enlisted on their exchange traded funds, we can say that this expand the application use case for bitcoin through a centralized media for being enlisted among other securities that were being traded for as approved by the government.

[bitmover]

Back to the question of why there is a need for a spot BTC ETF?

I mean if one can buy BTC from an exchange why there is a need for a spot BTC ETF?

So the question why not invest in bitcoin in the first place? One  reason I can think of is the hassle and availability to almost everyone.
- As an avid Bitcoin holder, buying and storing a fraction of cryptocurrency during my early days in crypto was quite cumbersome. You need to register in a centralized exchange, you need to know the technicalities of what bitcoin wallets are and how to protect them, the nitty gritty on how to save some fees during transactions or any other hassle that a newbie needs to go through to have their own piece of the pie.

Now with spot BTC ETF, you can have your bitcoin without worrying about all the hassle I mentioned above. You can just buy or sell them like a traditional stock. With the current issue by BlackRock, I am not sure how thing pans out, but Bitcoin ETF could be available to traditional brokerages like Fidelity or Ameritrade.

For most people, you are right, and a bitcoin is much better than some Bitcoin Etf shares.

However,  that is not why a bitcoin etf is important.
A bitcoin etf is important specifically for institutions which cannot buy a bitcoin,  due to regulations.  For example, pension funds cannot buy bitcoin, but they can buy an ETF.

This is why an ETF is important.  There are trillions of dollars in pension funds, and even if 0.1% of some funds buy a Bitcoin ETF it could gave a big difference in price.

There are also other funds which will benefit from this etf, not just pension funds.

[Lucius]

~snip~
A bitcoin etf is important specifically for institutions which cannot buy a bitcoin,  due to regulations.  For example, pension funds cannot buy bitcoin, but they can buy an ETF.

This would not be true, at least as far as the US is concerned, because there are cases where pension funds have even invested directly in Bitcoin. In my opinion, ETF is still something that will be used by those who want to trade with BTC, but do not want to have direct contact with it in the way that they have to directly buy and store it.

It is possible that the spot ETF would be something that will attract even more large investors, although for those who invest large sums of money in the long term, nothing but a non-custodial solution actually makes sense. The risk of hacking or some other accident is too great, at least in my opinion.

The Houston Firefighters’ Relief and Retirement Fund (HFRRF) made news recently when it announced it was investing $25 million in bitcoin and ether, marking what was believed to be the first time a U.S. pension fund had put cryptocurrencies directly on its balance sheet.
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To be sure, the HFRRF was not the first U.S. pension fund to invest in crypto more broadly. That distinction appears to belong to the Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System, which in 2018 began investing in funds managed by Morgan Creek Digital that would eventually add up to a combined $73 million.

[mk4]

You know those boomers who don't even know how to use a computer? Yea, some of them might want to get a slice of the tasty bitcoin pie without needing to know how to do security and self-custody and stuff.

[bitmover]

~snip~
A bitcoin etf is important specifically for institutions which cannot buy a bitcoin,  due to regulations.  For example, pension funds cannot buy bitcoin, but they can buy an ETF.

This would not be true, at least as far as the US is concerned, because there are cases where pension funds have even invested directly in Bitcoin. In my opinion, ETF is still something that will be used by those who want to trade with BTC, but do not want to have direct contact with it in the way that they have to directly buy and store it.

The Houston Firefighters’ Relief and Retirement Fund (HFRRF) made news recently when it announced it was investing $25 million in bitcoin and ether, marking what was believed to be the first time a U.S. pension fund had put cryptocurrencies directly on its balance sheet.
---
To be sure, the HFRRF was not the first U.S. pension fund to invest in crypto more broadly. That distinction appears to belong to the Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System, which in 2018 began investing in funds managed by Morgan Creek Digital that would eventually add up to a combined $73 million.

Thr pension fund didn't buy bitcoin directly   .

They invested in a fund which invests in bitcoin, according to your quoted text.

Although this is interesting,  this fund most likely is not 100% btc and probably have high adm fees. An etf is a better instrument,  which will most likely attract more money from institutions imo.

Edit: it is veery strange to see a  pension fund buying bitcoin directly.  Probably theree is some specific legislation in their state to allow such thing, which is very weird and not common, even in us.
It is an exception

[Lucius]

~snip~
Edit: it is veery strange to see a  pension fund buying bitcoin directly.  Probably theree is some specific legislation in their state to allow such thing, which is very weird and not common, even in us.
It is an exception

I haven't researched if that's the exception, but I don't think there might even be any particular rule that would prohibit pension funds from investing in Bitcoin or anything else when it comes to the US. We also have an example from Canada where a large pension fund invested $95 million in FTX, which only tells us that such funds have great freedom when it comes to the assets of their clients.

Ontario Teachers', one of Canada's largest pension funds with nearly $250 billion in assets under management (AUM), will write down the entirety of its $95 million investment in FTX after the troubled crypto exchange filed for bankruptcy protection.
The fund said it invested $75 million in FTX International and its U.S. entity FTX.US in October 2021, and then another $20 million in FTX.US in January of this year, according to a statement.