What Is the Difference Between Blockchain ETFs and Bitcoin ETFs?
Bitcoin ETFs are still an air castle, even though bitcoin is gaining momentum among investors. Meanwhile, mainstream markets have also seen the introduction of blockchain ETFs. The phrases bitcoin and blockchain are sometimes used interchangeably in popular media and news stories. As a result, many investors wrongly assume that blockchain ETFs are the same as bitcoin ETFs.
It’s crucial to understand the differences between bitcoin ETFs and blockchain ETFs before deciding which instruments they monitor. Bitcoin is a cryptocurrency, and blockchain is the infrastructure that underpins it. When it comes to investment securities, the differentiation becomes much more relevant.
Even though bitcoin futures are already available on the country’s two largest markets, the cryptocurrency’s legal position throughout several jurisdictions remains uncertain. It is involved in various regulatory wars and is being prosecuted for promoting illegal activity, including money laundering.
In controlled markets, four blockchain ETFs are already available. The four were released in 2018 and had a combined $278 million in assets under administration. Their cost-to-income rates range from 0.70 to 0.65 percent.
Investors pumped $180 million into blockchain ETFs in the first two weeks of their launch, according to a Wall Street Journal article. These ETFs have had higher trading volumes than other equivalent instruments that had been introduced since October 2017.
What Are the Differences Between Bitcoin ETFs and Blockchain ETFs?
Blockchain ETFs are exchange-traded funds that watch the stock market values of firms that have invested in blockchain technologies. Since blockchain is a technology, it isn’t affiliated with anyone’s business or product.
The blockchain investing world is vast and not limited to a single industry. For example, IBM and Maersk have allied to introduce blockchain in the freight industry. Similarly, Overstock, through its Medici Ventures and zero digital coin exchange, has made blockchain investments. These companies are, unsurprisingly, popular with blockchain ETFs. Both businesses are listed in Amplify ETFs’ Amplify Transformational Data Sharing ETF (BLOK) and Reality Shares Nasdaq NexGen Economy (BLCN) ETFs.
The majority of bitcoin ETF applications filed with the SEC suggested monitoring the price of bitcoin by Cboe and CME futures contracts. ETFs watch the price of bitcoin by owning futures contracts in this model.
The SEC, on the other hand, dismissed the ETF proposals due to “liquidity and valuation” issues. Bitcoin futures contracts have poor exchange rates and liquidity at the moment. As a consequence, rather than leading, futures markets obey unpredictable spot exchange prices.
Blockchain ETFs are currently less risky than bitcoin ETFs in their present form. This is because they are not vulnerable to bitcoin’s crazy price spikes.
Wrapping Up
Since blockchain is a new technology, it does not yet have a wide demand. As a result, the ETF’s stock prices are more vulnerable to causes that have little to do with or impact blockchain technology. The actions of regulatory authorities on bitcoin and cryptocurrencies would have a significant impact on bitcoin ETFs until they are introduced.
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