“How Bitcoin ETF approval will affect Bitcoin Future – Pros and Cons”

What is Bitcoin ETF?
Let’s first understand what an ETF is- It is an Exchange Traded Fund that owns the shares of
stock, gold bars, foreign currency etc. (Bitcoin in this case) and divides ownership of those assets
into shares. An ETF trades like a normal stock on stock exchange and its price is decided during
market hours. It’s cheaper to invest in an ETF and it can be owned only in whole numbers.
Bitcoin will be the asset for Bitcoin ETF and the exchange will provide local or international
retail investors an opportunity to buy Bitcoin through the stock market, without actually owning
it. ETF has higher daily liquidity which makes it more attractive.
Bitcoin ETF journey in brief
It all started with the Winklevoss twins who are trying since 2013, but the Securities and
Exchange Commission (SEC) has rejected their application but now many new players are in
league but the most promising is the Chicago Board Options Exchange (CBOE) because it is
providing a service which is much needed in financial world to secure the investors from threats
or hacks which is insurance. Another applicant is Direxion investments and the final decision on
its application will be taken on September 21st( a day of optimism for crypto world).
Pros
Liquidity- It is believed that the Bitcoin will have higher liquidity in an ETF.
Price surge- The price of bitcoin will increase positively creating huge wealth for investors as it
sees as an asset like gold.
Market reach- Since the exchange will work internationally, to reach market in different
countries will become easy and it will take less time which increases trust between the people to
expand more.
Cons
Valuation- Cryptocurrencies are volatile and the fund that sells an ETF will need to calculate
end of day net asset value for tac and price variations, it becomes difficult.
Manipulation- There are very less investor protections in crypto than traditional securities
markets with higher frauds and manipulation.
Volatility- ETF is required to have a market price that does not deviate from net asset value.It
becomes difficult to ensure fair price through arbitrage. It is still hard to solve and no clear
solutions have emerged.