Square Site Map
#ContentStar
Types of Crypto ETFs
Crypto ETFs come in three main types: physically-backed, synthetic-backed, and crypto-adjacent.
The first type, physically-backed ETFs, involves an investment firm that manages the fund and purchases actual cryptocurrencies. The ownership of these coins is then represented as shares in the ETF. By purchasing shares in the ETF, investors indirectly own the underlying cryptocurrencies. This approach allows individuals to gain exposure to digital assets without the costs and risks associated with owning them directly.
On the other hand, synthetic-backed ETFs are a variant that tracks cryptocurrency derivatives such as futures contracts and other cryptocurrency exchange-traded products (ETPs). For instance, some ETFs proposed to the U.S. Securities and Exchange Commission (SEC) track the prices of BTC futures contracts traded at the Chicago Mercantile Exchange (CME). In this case, the ETF's share price mirrors the price movements of these derivatives, rather than the actual cryptocurrencies themselves.
The third type of crypto ETF is known as an crypto-adjacent ETFs. Unlike other crypto ETFs that track the price of specific cryptocurrencies or use futures contracts, these ETFs focus on investing in stocks of companies involved in the cryptocurrency industry. This approach allows investors to make a broader bet on the future growth of the overall crypto economy, rather than solely relying on the price movements of individual cryptocurrencies like Bitcoin. #ContentStar
EDUCATIONAL MATERIAL ⚡️
What is a Crypto ETF? Your Comprehensive Guide to Crypto ETF
Majority of us have been hearing about crypto ETFs, well here is a breakdown of what they are and how they impact the crypto space
Crypto ETFs are exchange-traded funds (ETFs) that track the price of one or more cryptocurrencies.
- Three main types of crypto ETFs: physically-backed, synthetic-backed, and crypto-adjacent.
- Currently in the US, only synthetic-backed and crypto-adjacent ETFs are allowed by the SEC. Several firms are trying to get permission to offer physically-backed ETFs.
- While crypto ETFs offer investors a simplified way to gain exposure to the crypto market without delving into the technical intricacies, it's important to acknowledge certain drawbacks such as tracking error or limitations in accessing the benefits of DeFi.
What are Crypto ETFs?
Before getting to crypto ETFs, we need to know what ETFs are.
In simple terms, an ETF, or exchange-traded fund in full, is an investment fund that lets you buy a large basket of assets, which could include stocks, bonds, commodities, or even alternative assets such as real estate or cryptocurrencies, in one purchase. ETF is designed to mirror the performance of a specific index, sector, or asset class, and can be traded on stock exchanges just like individual stocks. These funds also function much like common stocks, as their prices can vary within a day based on investor sales or purchases. Basically, ETF combines the best features of indexes and stocks, offering investors exposure to a diversified portfolio of assets at regularly updated prices.
Crypto ETFs, unlike traditional ETFs that track indexes or various assets, specifically track the price of one or more cryptocurrencies. On the other hand, similar to how traditional ETFs work, crypto ETF prices may fluctuate several times during the day depending on trading activities. Crypto ETFs provide an excellent alternative solution for those interested in cryptocurrencies but hesitant to manage the relatively new form of assets themselves.
In 2021, the first crypto ETF ever released was the Purpose Bitcoin ETF(BTCC) in Canada. This is an ETF that tracks BTC spot prices. 
