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Crypto ETFs Are A Big Deal For Financial Advisors

As we discuss in our main story, a Bitcoin Futures ETF is likely to hit the street next week.

Why should we care if we can already trade Bitcoin?

Because it opens up managed money to this alternative asset.

You see, many financial advisors are limited in what they can invest client funds in.

And cryptocurrencies tend not to be one of them.

Cryptos trade on unregulated exchanges with unregulated reporting.

Which is why a Bitcoin ETF is so important.

ETFs are governed by their own set of rules and regulations.

So, building a vehicle within this structure immediately opens up investments from money managers.

Does it mean we’ll suddenly see massive inflows next week?

That’s tough to say.

But it does mean Bitcoin is about to get a whole new set of backers.

Bitcoin ETFs Ready For Launch

Key Takeaways

• Regulators are set to vote to approve the first Bitcoin Futures ETF on Monday.
• The Bitcoin ETF opens up investing to a broader audience with many of the security features embedded in the ETF structure.
• This ETF holds Bitcoin futures (derivatives), not actual Bitcoins.
• Ahead of the approval, Bitcoin has rallied nearly 40% this month.

Bitcoin investors are about to get a major boost as regulators review the first Bitcoin Futures ETF on Monday.

And in case you weren’t aware, this is a HUGE deal.

Bitcoin Goes Mainstream

Until now, only Grayscale’s Bitcoin Trust (GBTC) provided average investors an avenue to invest in Bitcoins indirectly.

The problem is trusts like Grayscale’s can charge extremely high premiums along with annual fees. Additionally, it’s not registered with the SEC, making it a bit riskier.

A Bitcoin Futures ETF deal alleviates many of these concerns.

However, futures contracts are derivatives of actual Bitcoins. That means the price of those contracts can and does dislocate from the spot price of Bitcoin. And, the nature of futures contracts ETFs means ‘roll costs’ (switching from the expiring contract to the next month’s contract) will erode value over time.

In an ideal world, we’d have an ETF backed by actual Bitcoins.

But this is a big step in the right direction.

SEC Likes The ETF Idea

Gary Gensler, head of the SEC, needs to balance cryptocurrency regulation and support.

ETFs create a temporary bridge.

You see, a Bitcoin futures ETF allows the broader public to get involved with the cryptocurrency without issues stemming from direct ownership such as custody, forgetting your password, or hackers.

Ahead of the approval, Bitcoin surged 4% to almost $60,000 – a rally of nearly 40% this month, bringing its total value to more than $1.1 trillion.

Bitcoin’s surge hasn’t trickled down to other cryptos as it once did, with many from Dogecoin to Cardano lagging Bitcoin’s performance.

Sentiment in the cryptocurrency has gotten so bullish, many are beginning to wonder if we’re hitting peak exuberance.

The Bottom Line: This pushes cryptocurrencies further into the mainstream and makes it easier for retail traders to participate. However, investing in futures-based ETFs comes with different risks than those that hold the asset in storage (or in this case a wallet).