This is what investing in Spot Bitcoin ETFs is all about.

A significant change has occurred since the US Securities and Exchange Commission (SEC) recently approved the first Bitcoin ETFs (exchange-traded funds) to invest in BTC.

This discovery gives investors a new way to engage with the largest cryptocurrency. As such, it combines traditional investment methods with the cryptocurrency market.

What are Spot Bitcoin ETFs?

Spot Bitcoin ETFs represent a shift from past investment models in the crypto industry. While traditional ETFs based on Bitcoin futures contain speculation about future prices, these new ETFs hold actual Bitcoin. Therefore, the new investment products align the investors' needs directly with the current market price of the cryptocurrency.

This transition to physical BTC holdings provides a more transparent and straightforward investment strategy, reducing the complexity of futures contracts. Moreover, due to the increasing scarcity of Bitcoin, it can cause a demand shock.

“Major institutions do not have a high-bandwidth channel to invest in this asset class as far as spot ETFs. I think the approval of the place [Bitcoin] ETFs will definitely be a major trigger for a demand shock. Then, that will be followed by a supply shock in April because 900 BTC per day are naturally available for sale by sellers, miners, and that number is going to decrease. [due to the Bitcoin halving] About 450 Bitcoin per day. It's a big deal, says Michael Saylor, CEO of MicroStrategy.

Read more: Bitcoin Half Cycles and Investment Strategies: What You Need to Know

How to invest in Spot Bitcoin ETFs

The process of investing in Bitcoin ETFs mirrors that of traditional stocks, providing investors with ease and familiarity. Financial experts also emphasize the ease of buying these ETFs through regular brokerage accounts. However, others recommend being vigilant about liquidity, especially in the early stages after a startup.

On their first day of trading, the market responded enthusiastically, with more than $4.6 billion worth of shares traded in various U.S.-based Bitcoin ETFs. Indeed, these figures indicate strong investor interest and market confidence.

Read more: How to prepare for a Bitcoin ETF: A step-by-step approach

However, investors should note that not all brokerage firms have adopted these new ETFs. For example, Vanguard has chosen to offer direct Bitcoin ETF trading, while US bank Merrill Edge is still evaluating its position.

Certainly, this difference in availability highlights the wariness of some financial institutions towards volatile asset classes like cryptocurrencies, as a Vanguard spokesperson explained.

“We have no plans to offer Vanguard Bitcoin ETFs or other crypto-related products – our view is long-standing because the high volatility of cryptocurrencies is contrary to our goal of helping investors maximize long-term positive returns,” a Vanguard spokesperson said. .

Differences between Spot Bitcoin ETF

The SEC approval introduced 11 spot Bitcoin ETFs backed by industry giants such as BlackRock, Fidelity Investments and Invesco. As such, this diversity provides investors with multiple entry points into the Bitcoin market.

Each of them has unique features and is supported by the popularity of established financial organizations. As a result, in an aggressive bid to attract investors, ETF issuers have significantly reduced their fees. This competitive pricing strategy makes Spot Bitcoin ETFs a cost-effective alternative to traditional digital wallets.

With companies like Bitwise and ARK, payouts announced for the first time or upon reaching certain asset milestones make the deal even sweeter for early investors.

Advantages of Investing in Spot Bitcoin ETFs

These ETFs democratize access to BTC by combining the benefits of lower fees and the security of large and reputable companies. Moreover, Mati Greenspan, CEO of Quantum Economics, told BeInCrypto that Bitcoin ETFs are a package of cryptocurrency investments that are widely accepted, avoiding the need for direct physical protection.

This innovation will open up BTC investment to more investors, increase liquidity and increase market growth.

“In the Middle Ages, [Bitcoin ETFs] Greenspan should provide a frictionless way for institutions to add bitcoin to their books in a manner that is regulatory-friendly and compatible with various fund structures.

Despite their appeal, Bitcoin ETFs carry inherent risks, primarily due to the cryptocurrency's volatility. SEC Chairman Gary Gensler's comments underscore the need for investor caution.

“Bitcoin is primarily a speculative, volatile asset, and is also used for illegal activities, including ransomware, money laundering, sanctions fraud, and terrorist financing. While we approved the listing and trading of Bitcoin ETP shares in a certain location, we did not endorse or endorse Bitcoin,” Gensler said.

The volatile nature of Bitcoin prices can be scary, and while ETFs offer a layer of safety, they don't negate the speculative nature of cryptocurrency investing. Therefore, potential investors should recognize the volatile and speculative nature of Bitcoin and balance their interests by carefully evaluating their risk exposure and investment goals.