An ETF is an investment fund traded on a stock exchange, the first Bitcoin ETF had been proposed but may have developed since.
What is a Bitcoin ETF?
An ETF is a type of investment that works a bit like a stock. Instead of focusing on just one company, an ETF is designed to follow the ups and downs of something else, like a particular resource or a group of companies.
Think of it as a way for people to invest in the value of something without actually owning it. For instance, you can invest in gold or oil without physically buying these things. ETFs are bought and sold on a regular stock market, and their price tends to go up if the thing they’re tracking becomes more valuable, and down if it becomes less valuable.
Did you Know About Bitcoin First ETF?
Back in 1993, the first ETFs were introduced, and they became a hit among everyday investors who wanted to invest in a collection of things altogether. For instance, if you were interested in investing in the 500 biggest American companies all at once, you could do that by purchasing shares in an S&P 500 ETF.
A Bitcoin ETF operates quite similarly to other ETFs. People buy shares in the ETF just like they buy stocks, using their regular brokerage. Then, they can trade these shares just as easily as they would trade shares of companies like Apple or Tesla.
A Brief History of Bitcoin ETFs Progress
Here’s a brief rundown of the progress of Bitcoin ETFs over time:
- July 2013: The Winklevoss Bitcoin Trust puts forward the very first proposal for a Bitcoin ETF.
- June 2018: The SEC turns down the second Bitcoin ETF proposal by the Winklevoss twins.
- October 2019: Bitwise’s Bitcoin ETF proposal is rejected by the SEC.
- February 2020: The SEC rejects the Bitcoin ETF project by Wilshire Phoenix.
- September 2020: The world sees its first Bitcoin ETF listed on the Bermuda Stock Exchange.
- December 2020: VanEck makes a fresh proposal for a Bitcoin ETF after withdrawing previous ones before facing formal rejections multiple times.
- February 2021: Canada launches its first Bitcoin ETF, the Purpose Bitcoin ETF (BTCC), with two more getting approval the same month: the Evolve Bitcoin ETF (EBIT) and the CI Galaxy Bitcoin ETF (BTCX).
- October 2021: The first Bitcoin ETF is introduced in the U.S., the ProShares Bitcoin Strategy ETF (BITO).
- June 2023: The SEC gives the green light to the 2x Bitcoin Strategy ETF (BITX) from Volatility Shares and the very first Leveraged Bitcoin Futures ETF.
Let me Explain How a Bitcoin ETF Works in Simple Terms
A Bitcoin ETF is like a special fund run by a company. This company buys and holds actual Bitcoins, and the value of the ETF is connected to the Bitcoins they have. They list this ETF on a regular stock exchange, so you, as an investor, can easily buy and sell it, just like you do with regular stocks. This kind of ETF also lets you do interesting things like betting against Bitcoin, which is called short-selling.
But there are some important differences between a Bitcoin ETF and other types of ETFs.
First, some ETFs follow big groups of companies, like the S&P 500, which means you can get a share of the money those companies pay to their investors. For instance, if a company like Tesla gives out dividends, you’d get a piece of that dividend if you own an ETF with Tesla in it.
However, since Bitcoin doesn’t work like that (it’s decentralized), a Bitcoin ETF won’t give you dividends.
Second, like with any ETF, you need to pay a fee to the company that manages it. But with a Bitcoin ETF, some of your fees will be used to cover the costs of keeping the Bitcoins safe and well-managed, which is called custody and management.
So, a Bitcoin ETF lets you invest in Bitcoin without actually buying it, and it works kind of like regular ETFs but with some unique features.
Read More: What is 3X Leverage Bitcoin?
Wrap-Up About First Bitcoin ETF?
ETFs offer a flexible investment avenue by mirroring the performance of various assets or groups, allowing investors to participate in their value without direct ownership. Whether tracking resources or companies, ETFs provide a convenient way to diversify portfolios and respond to market trends. Their tradable nature on stock markets adds liquidity and potential for profit, making them a popular choice in modern investment strategies.
Frequently Asked Questions (FAQs) About First Bitcoin ETF?
What is the first ETF for cryptocurrency?
The inaugural cryptocurrency ETF was ProShares’ BITO, debuting in 2021 with $1 billion trading volume on day one and attracting $570 million in assets.
Is there an ETF that owns Bitcoin?
Bitcoin ETFs do not possess actual Bitcoin; instead, they hold Bitcoin-related firms, other crypto ETFs, or Bitcoin futures contracts.
Is Bitcoin ETF the same as Bitcoin?
A Bitcoin ETF tracks Bitcoin’s value, providing exposure without actual ownership, similar to other securities. It mirrors Bitcoin’s worth but doesn’t grant ownership of the cryptocurrency.