Exchange Traded Fund (ETF) is a security of valuable assets such as stocks, bonds, commodities, or crypto assets that can be traded as a single entity through the exchange. ETFs allow investors to diversify their investments without owning these assets. It’s because ETFs track the price of a particular asset. For example, the S&P 500 ETF, is an ETF that tracks the prices of stocks that are in the S&P 500 index.
Currently, there is also an ETF that tracks the price of crypto assets called the Bitcoin ETF. This asset works by using a Bitcoin futures contract as its underlying. By purchasing a Bitcoin ETF, investors who are not comfortable investing in cryptocurrencies can access them without actually owning them. Bitcoin ETFs are also regulated as financial products so they can be traded on stock markets such as the NASDAQ or NYSE.
Apart from diversification, another advantage of ETFs is their low costs, particularly in passively managed ETFs. Usually, the fund manager will track the performance of an index. Through ETFs, investors can also do short-shell, something that cannot be done in traditional markets. If you are interested in digging deeper into Bitcoin ETF, don’t forget to read the following article.