What is BTC Spot ETF? What does it mean if it passes SEC review?

There has always been a barrier between traditional investment and the crypto market: traditional investors refuse to enter the crypto market because of its high volatility, while crypto investors are unwilling to endure the slow growth of traditional investments.

On July 16, institutions such as BlackRock, Fidelity, Vaneck, WisdomTree, and Invesco submitted applications for Bitcoin spot ETF to the U.S. Securities and Exchange Commission (SEC); on July 17, the SEC officially confirmed the receipt of the above institutions' Bitcoin ETF applications; on July 19, the U.S. SEC will begin reviewing whether to approve or reject six Bitcoin spot ETF listing applications, with a review period of up to 240 days. Since the beginning of this year, including BlackRock, a total of 8 large financial institutions have submitted Bitcoin spot ETF applications to the U.S. SEC.

What is Bitcoin spot ETF, and what does it mean if it passes SEC review? veDAO Research Institute will provide an interpretation of Bitcoin spot ETF in this article.

Bitcoin Spot ETF

What is ETF

ETF refers to Exchange Traded Fund, which sells shares to investors on the open market and uses the proceeds to build a portfolio of assets based on market indices, stock market sectors, or other asset categories. ETFs were introduced in 1993 and have been popular as a way for ordinary retail investors to invest in a basket of assets at once. ETFs are similar to mutual funds. However, unlike mutual funds, ETFs are traded directly on stock exchanges like any other stock.

What is Bitcoin Spot ETF

Bitcoin spot ETF is a newcomer in this field, mainly investing in assets related to the original cryptocurrency Bitcoin. Bitcoin spot ETF allows investors to access the attractive potential of BTC without the need to directly own or securely store it. This enables investors to gain exposure to Bitcoin price fluctuations without actually holding the cryptocurrency. Bitcoin spot ETF tracks the price of Bitcoin, allowing investors to buy and sell fund shares on regular exchanges. This makes it easier for both retail and institutional investors to participate in cryptocurrency. Therefore, Bitcoin spot ETF will be a game changer, bridging the gap between the traditional financial world and the emerging decentralized alternative solutions, providing investment opportunities for controversial digital asset categories in a traditional context.

Advantages of Bitcoin Spot ETF

Simplified investment process: Bitcoin spot ETF provides investors with a worry-free and supervised BTC investment option without the complexities of holding and maintaining digital currencies.

Diversification: Bitcoin spot ETF allows investors to achieve portfolio diversification. By increasing investments in Bitcoin (which historically has low correlation with traditional asset classes such as stocks and bonds), investors can reduce overall portfolio risk and increase potential returns.

Professional management: Bitcoin spot ETFs are managed by professional investment companies with expertise in portfolio management and risk mitigation. These companies conduct research, monitor market trends, and make wise decisions on behalf of investors, potentially optimizing returns and managing risks.

Regulatory compliance: Bitcoin spot ETFs operate within a regulatory framework, providing investors with protection and supervision that may be lacking in unregulated cryptocurrency markets. Compliance with regulatory requirements can provide investors with greater confidence and assurance.

Cost-effectiveness: Investing in Bitcoin spot ETFs is more cost-effective than directly purchasing and storing BTC. ETFs typically have lower trading costs, management fees, and operational expenses, making them an attractive choice for cost-conscious investors.

Impact of Bitcoin Spot ETF on the Market

In simple terms, once Bitcoin spot ETF is approved, it means that the market will introduce trillions of dollars in funds, which is a huge positive for Bitcoin at present. Bitcoin spot ETF is expected to increase the liquidity of this cryptocurrency. Secondly, including Bitcoin in such a massive financial market helps to increase its popularity and exposure.

For most conservative investors, cryptocurrency is still an unknown choice, both a risky bet and a curious novelty. Bitcoin spot ETF is expected to elevate the mainstream credibility and acceptance of Bitcoin investments to a new level, further enhancing the overall credibility and acceptance of cryptocurrencies. SEC approval of Bitcoin spot ETF represents a new recognition in the mainstream market, and more importantly, it makes it easier for institutional investors to build positions.

If Bitcoin spot ETF is implemented, more people will be willing to understand Bitcoin, including its basic operations and trading patterns, which will promote the globalization of Bitcoin. At the same time, due to decentralization, these digital assets face significant security risks, but purchasing Bitcoin spot ETF does not require direct holding of the currency, thus lowering the entry barrier for investors and reducing concerns about asset security.

Once Bitcoin spot ETF is officially listed in the United States, it will be a milestone event in the global blockchain field, as U.S. regulatory agencies legally recognize Bitcoin as a financial product, increasing the influence of the U.S. on Bitcoin prices.

Conclusion

The launch of Bitcoin ETF is a major step forward for the cryptocurrency industry. Although legal barriers still exist, the entry of major companies such as BlackRock into the market indicates that traditional financial institutions are becoming more open to digital assets. If Bitcoin spot ETF is approved, the general public may find it easier to access Bitcoin, institutional investors may be attracted, and the entire cryptocurrency industry may move towards full maturity.

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