What is a Bitcoin ETF? How to Purchase Bitcoin ETFs on uSMART?

In recent years, cryptocurrencies have emerged as a novel investment class, with Bitcoin being the most recognized among them. Having once surpassed the $60,000 mark, achieving historic highs, the market has witnessed the introduction of Bitcoin Exchange-Traded Funds (ETFs). So, what exactly is a Bitcoin ETF, and how can one purchase it on the uSMART platform? This article will provide a detailed overview, including information on the types of Bitcoin ETFs, how to choose them, and the associated investment risks.

What is Bitcoin?

Bitcoin (BTC) is the earliest form of virtual currency, also known as a cryptocurrency. Introduced in 2009 by an individual or group using the pseudonym Satoshi Nakamoto, Bitcoin operates on a decentralized system, not issued by central banks or government institutions. Existing solely in electronic form, transactions, transfers, and storage occur electronically. Bitcoin is essentially a string of code without a physical presence. Blockchain technology underpins Bitcoin, ensuring secure, anonymous, and tamper-resistant recording of transactions.

 

What is a Bitcoin ETF?

A Bitcoin ETF is specifically designed to track the price of Bitcoin. Its price and volatility closely correlate with the market price and volatility of Bitcoin. Bitcoin ETFs enable investors to participate in Bitcoin investments through their brokerage accounts without directly purchasing and storing Bitcoin. This significantly lowers the barriers to Bitcoin investment for both traditional institutions and individual investors. Additionally, Bitcoin ETFs provide increased liquidity, transparency, and convenient trading methods.

 

Types of Bitcoin ETFs:

Bitcoin ETFs can be categorized into physically-backed ETFs (spot Bitcoin ETFs), synthetically-backed ETFs (futures Bitcoin ETFs), and other types.

 

Physically-Backed Bitcoin ETFs:

1.These ETFs track the price of actual Bitcoin in the spot market.

2.Asset management companies purchase and hold physical Bitcoin, representing ownership through ETF shares.

3.Individuals indirectly own Bitcoin by purchasing ETF shares.

4.As of now, the U.S. Securities and Exchange Commission (SEC) has not approved the launch of physically-backed Bitcoin ETFs.

 

Synthetically-Backed Bitcoin ETFs:

1.These ETFs track the prices of Bitcoin derivatives, such as Bitcoin futures or other cryptocurrency trading derivatives.

2.Some Bitcoin futures ETFs have been approved by the SEC.

3.For example, the ProShares Bitcoin Strategy ETF (BITO) tracks the prices of BTC futures contracts traded on the Chicago Mercantile Exchange (CME).

 

Notable Bitcoin Futures ETFs:

1.BITO (ProShares Bitcoin Strategy ETF):

1. Ticker: BITO
2. The first Bitcoin ETF, listed on the New York Stock Exchange on October 19, 2021.
3. Managed by ProShares with a management fee of 0.96%.
4. As of April 21, 2023, BITO's assets under management are approximately $953 million.

2.BTF (Valkyrie Bitcoin Strategy ETF):

1. Ticker: BTF
2. The second Bitcoin futures ETF, listed on Nasdaq in October 2021.
3. Management fee is 0.95%.
4. As of April 21, 2023, BTF's assets under management are around $29.6 million.

3.XBTF (VanEck Bitcoin Strategy ETF):

1. Ticker: XBTF
2. Listed on the Chicago Board Options Exchange in November 2021.
3. Management fee is 0.66%.
4. As of April 21, 2023, XBTF's assets under management are approximately $42 million.

 

All three options mentioned above can be purchased through the uSMART APP. 

Detailed steps are illustrated in the diagram below. 

Additionally, there are other listed Bitcoin futures ETFs, such as BITS and DEFI. If you are interested, please feel free to leave a message!

 

Purchasing Bitcoin ETFs on uSMART:

uSMART offers a convenient platform for purchasing Bitcoin ETFs. Follow the steps below:

1. Open the uSMART app and use the search bar to enter the keyword "Bito."
2. Click on "Trading" to access the relevant section.
3. Follow the illustrated steps to complete the purchase.

(This diagram is provided for illustrative purposes exclusively)

 

Advantages of Bitcoin ETFs:

1.Enhanced Security and Accessibility:

• Simplifies Bitcoin investment process.
• Eliminates complexities of purchasing, storing, and securing Bitcoin.
• Reduces entry barriers and risks for institutional and individual investors from traditional markets.
• Enables convenient establishment of Bitcoin positions on exchanges, similar to stock purchasing.
• Mitigates concerns related to private keys, storage, and security.

2.Increased Liquidity and Stability in Cryptocurrency Market:

• Elevates Bitcoin recognition in traditional financial markets.
• Promotes widespread adoption and usage of Bitcoin.
• Attracts more participation from traditional investors.
• Enhances market liquidity by facilitating trading on exchanges.
• Improves transparency and stability in the cryptocurrency market.
• Mitigates risks associated with cryptocurrency investments.

3.Expedited Compliance Processes:

• Operates within established regulatory frameworks.
• Provides a secure and protected investment option.
• Facilitates a safer investment environment compared tto direct cryptocurrency trading.
• Contributes to the broader acceptance of Bitcoin and other cryptocurrencies in traditional financial markets.
• Acts as a positive catalyst for the development and recognition of cryptocurrencies.

 

Why Choose uSMART for Bitcoin ETFs:

1.Licensed Brokerage: 

uSMART is affiliated with Yingli Securities (Singapore) Limited, an internationally leading securities company and licensed brokerage. Regulated by the Monetary Authority of Singapore, Yingli Securities ensures the safety and reliability of funds. Committed to providing intelligent, professional, and excellent one-stop financial services, it caters to an extensive international user base.

2.Convenient Account Opening:

Enjoy the ease of online account opening in just 3 minutes, ensuring a quick and straightforward process for users.

3.Real-time Market Data:

Access real-time updated quotes, providing a free and comprehensive understanding of deep market trends in U.S. stocks.

4.Smart Dollar-Cost Averaging (DCA):

uSMART's intelligent DCA feature offers a flexible and convenient investment tool. Users can systematically invest a fixed amount at chosen intervals—daily, weekly, or monthly—facilitating gradual and stable accumulation of investments.

5.Intelligent Analysis Tools for Informed Investment Decisions:

uSMART provides intelligent investment strategies with diverse styles, making it easy to seize favorable buying and selling opportunities. Pursue robust asset appreciation with round-the-clock, unbiased support for investment strategies.

 

Risks Associated with Investing in Bitcoin ETFs

While ETFs may appear to be an approachable investment tool for entering the world of cryptocurrencies, it is crucial to understand the underlying risks before making decisions:

1.Regulatory Risks:

Regulatory authorities in many countries closely monitor the development of cryptocurrencies. For example, China's National Development and Reform Commission emphasizes comprehensive rectification, focusing on industrial centralized mining and state-owned entities involved in mining. Additionally, recent tax regulations in the United States are perceived by cryptocurrency investors as unfriendly measures. Therefore, regulatory risks from authorities should not be overlooked.

2.Bitcoin ETFs Do Not Hold Actual Cryptocurrencies:

As mentioned earlier, Bitcoin ETFs track Bitcoin futures, not actual Bitcoin investments. Therefore, they may not fully capture Bitcoin's movements, leading to discrepancies in actual prices and affecting returns. If one intends to invest directly in Bitcoin, trading platforms like Binance or Kikitrade would be necessary.

3.ETFs Incur Management Fees:

While the management fees for these ETFs are below 1%, they still constitute an investment cost. The larger the holding, the relatively higher the management fees incurred.

4.Limited Trading Hours:

Bitcoin ETFs listed on U.S. exchanges have trading hours aligned with U.S. stock market hours, unlike Bitcoin, which can be traded 24 hours a day. This limitation in trading hours is a notable difference.

5.Bitcoin Futures Risks:

Compared to more mature futures commodity markets, the Bitcoin futures market has lower trading activity, lower liquidity, and higher volatility. Despite significant growth in the Bitcoin futures market since its inception, the continuity of this trend is uncertain. Factors such as recent restrictions on Bitcoin demand and mining caps have resulted in Bitcoin futures trading prices significantly higher than spot Bitcoin prices. Therefore, investing in Bitcoin futures and related derivatives should be regarded as a more aggressive and higher-risk investment. It's essential to recognize that there might not be a direct correlation between Bitcoin futures contracts and the performance of the Bitcoin currency itself.

Virtual currencies exhibit differences from traditional investment tools, coupled with substantial price fluctuations, exposing retail investors to significant risks. Therefore, before engaging in investments related to such products, it's advisable to thoroughly understand the rules of the cryptocurrency market.

 

 

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