Headlines discussing “Bitcoin ETF” have recently dominated the cryptocurrency sphere. The notion of an ETF has caused buzz because of a recent SEC decision to delay a ruling on Bitcoin ETFs which caused a slight dip in the market. Many investors and holders of Bitcoin (and other cryptocurrencies) are eagerly anticipating this decision. However, what is an ETF, and why is it being talked about so much? This article helps you to understand what an ETF is and why it has become such a significant talking point in the crypto space.

What is an ETF

ETF is a financial term that stands for “Exchange Traded Fund.” This fund is a unique type of security that tracks the price of assets such as index funds and commodities throughout the day. Investors can efficiently invest in this fund instead of having to purchase the stock or asset directly. One of the key obstacles that have kept investors away from being involved in cryptocurrencies is the degree of risk involved in exchanges, and the various complications that arise in regards to purchasing and storing cryptocurrency. A Bitcoin ETF would allow investors to allocate significant funds into the cryptocurrency market without having to deal with this extra risk.

When investors purchase an ETF, they are buying the funds which track the price of Bitcoin rather than having to purchase directly through an exchange. This method is far safer, and most investors would prefer this option as it gives them greater security. For an investor, it makes a negligible difference if they have actual Bitcoin holdings or holdings of an ETF since the price is carefully tracked. In many ways, the emergence of a Bitcoin ETF would allow it to be seen as a key asset class in the eyes of many institutional investors. It would give cryptocurrencies a legitimacy that they haven’t yet been given in the investor class. This legitimacy is significant for both holders of cryptocurrency and those with substantial investment funds. An eventual decision would massively impact on both of these groups. Holders are eager to discover the potential price impact of a decision whereas those with investment funds want to see how a possible ruling would allow them to invest in the crypto market. Currently, Bitcoin or any other cryptocurrencies cannot be seen as a financial instrument. The US Securities Commision are in the process of deciding whether to change this ruling so that ETFs can be launched.

The relevance of the SEC

The SEC (U.S Securities and Exchange Commission) recently decided to delay a ruling of whether to change the rules which allow the creation of Bitcoin ETFs. This change of judgment is being pursued by three firms who have made their cases. It would be a significant decision, and therefore it is not surprising that the SEC has decided to delay the ruling by two months. A potential rule change would undoubtedly have a profound effect on the viability of cryptocurrency in the future (concerning an investment perspective). Anyone with a brokerage account could gain access to the cryptocurrency market, and this increased accessibility would make investing far more appealing. In a sense, it would allow cryptocurrencies to be seen as a prime asset class which would allow them to be included in substantial investment funds, potentially raising prices by a considerable amount. Cryptocurrency experts are divided on whether an ETF is needed, with some raising fears that it would harm the intended use of these coins as currency.

Conclusion

The concept of Bitcoin ETFs has led to widespread speculation and discussion within the cryptocurrency community. There are some who feel that it is not required, whereas others believe that this ruling is pivotal for the future of cryptocurrency. The SEC has rightfully decided to delay the verdict to take all factors into account. We will have a clearer idea of the future of Bitcoin and other cryptocurrencies once this monumental ruling is reached. If approved, another bull run may soon be a possibility.