What is a Bitcoin ETF? A Bitcoin ETF, which stands for Bitcoin Exchange Traded Fund, allows traders to gain exposure to Bitcoin risk through the traditional stock market without having to directly hold Bitcoin. Depending on the specific trading product, they can be divided into Bitcoin spot ETF and Bitcoin futures ETF.
What are the advantages of Bitcoin ETF? Compared to the mainstream digital asset trust funds represented by GBTC on the market, Bitcoin ETF mainly have the following advantages:
More freedom in trading. ETF allow market makers to freely create and redeem shares, while GBTC does not allow redemption, and the realization of fund shares must be through secondary market transactions.
Better liquidity. GBTC has a six-month lock-up period and usually has a high premium. ETF have better liquidity and usually do not have a premium or discount.
Lower trading costs. The trading costs of GBTC are high, involving broker fees, annual management fees, and also bearing the premium. In contrast, the costs of Bitcoin ETF are much lower. For example, as of the annual management fee, GBTC currently has a rate of 2%, while the Bitcoin futures ETF BITO, launched on October 19, 2021, has a management fee of only 0.95%.
Lower investment threshold. GBTC has a high investment threshold, starting at $50,000, and is only open to qualified investors. Bitcoin ETF have fewer restrictions on investor qualifications and investment amounts.
Brief History of Bitcoin ETF In July 2013, the Winklevoss brothers submitted a Bitcoin ETF application to the U.S. Securities and Exchange Commission (SEC), the first ETF application recorded in the history of Bitcoin development.
In July 2016, blockchain technology company SolidX submitted a Bitcoin ETF application to the SEC.
In January 2017, Grayscale first submitted a Bitcoin ETF application to the SEC, but later withdrew the application in October of that year.
In December 2017, Direxion and GraniteShares each submitted a Bitcoin ETF application to the SEC, but both were rejected in August 2018.
In January 2019, Bitwise submitted a Bitcoin ETF application to the SEC, but it was rejected in October of the same year.
In June 2020, WisdomTree Trust submitted a Bitcoin ETF that only included 5% of Bitcoin assets to the SEC.
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In February 2021, North America’s first Bitcoin ETF, the Purpose Bitcoin ETF, was approved in Canada and began trading on the Toronto Stock Exchange.
In October 2021, Grayscale once again submitted a Bitcoin ETF application to the SEC.
In October 2021, the SEC approved the ProShares Bitcoin Strategy ETF (BITO) for listing, which began trading on the NYSE Arca high-growth market. This is the first Bitcoin ETF in the United States, but it should be noted that BITO is a Bitcoin futures ETF product. As of October 20, 2021, the SEC had not yet approved any Bitcoin spot ETF.