SEC will allow Bitcoin futures ETF to start trading

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According to a CNBC report on Friday, in the huge victory of the cryptocurrency industry, the US Securities and Exchange Commission will allow the first batch of US Bitcoin futures exchange-traded funds to begin trading next week.

Sources familiar with the matter told CNBC that the US Securities and Exchange Commission is unlikely to block the futures-based Bitcoin ETF proposed by ProShares and Invesco. After the news spread, the price of Bitcoin soared above $60,000.

If you are interested in investing, financial experts recommend that you understand the potential risks of futures-based Bitcoin ETFs before spending money. This is something to consider.

The price of ETF will not be pegged to Bitcoin

First of all, it is important to understand that investing in futures-based Bitcoin ETFs is not a direct investment in Bitcoin.

Futures-based ETFs track futures contracts, not asset prices. Therefore, futures-based Bitcoin ETFs will track Bitcoin futures contracts, not the price of Bitcoin itself. Therefore, the price of the ETF will not match the price of Bitcoin.

This difference may be a risk, Ivory Johnson, a registered financial planner, chartered financial adviser and founder of Delancey Wealth Management, told CNBC Make It. The price of futures-based Bitcoin ETFs may be traded at a premium during a bull market or at a discount during a bear market.

CFRA ETF and mutual fund research director Todd Rosenbluth (Todd Rosenbluth) said that the difference in value is also why futures-based Bitcoin ETFs “may be more suitable for short-term investment rather than buying and holding long-term investments.”

Some Bitcoin proponents believe that investors can get better returns by buying cryptocurrencies directly. However, it is impossible to predict the future performance of any asset.

Futures-based Bitcoin ETFs may help those who are unsure how to buy Bitcoin safely, or those who don’t want to own Bitcoin Responsibility to protect and protect their Bitcoin wallets. The price of Bitcoin also fluctuates frequently, so investors who purchase cryptocurrencies directly must be able to withstand the fluctuations.

Ultimately, if you decide to invest in futures-based Bitcoin ETFs or Bitcoin itself, it depends on how much risk you want to take and how long you want to hold it.

Additional cost will be added

Investors should also be aware that futures-based Bitcoin ETFs may be more expensive than direct investment in Bitcoin.That’s because there are many The additional cost of futures contracts tracked by the ETF may affect the price that investors ultimately pay.

Johnson said that in addition, ETFs will require many intermediaries to participate in the investment, including hedge funds and ETF providers. Some people in the crypto space say ETF Will benefit these middlemen more Compared to retail investors, especially if the ETF is trading at a premium during the bull market.

“Hedge funds…receive these returns,” Raoul Pal, a cryptocurrency investor and former hedge fund manager Tweet on Friday. “Wall Street has become richer. Retail investors have lost again.”

Johnson said that middlemen have also deprived the spirit of encrypted assets, because the goal of a decentralized peer-to-peer network is to eliminate intermediaries in the traditional financial system.

Any exposure to encryption is risky

Finally, investors should know that there is still a risk of loss.

Although futures-based Bitcoin ETFs are not direct investments in cryptocurrencies, experts still believe that they are risky. They believe that asset classes are volatile and speculative, so they recommend investing only in losses that you can afford.

As the Investor Education and Advocacy Office of the U.S. Securities and Exchange Commission Tweet On Thursday, “Before investing in a fund that holds Bitcoin futures contracts, make sure to carefully weigh the potential risks and benefits.”

“All fund investments involve the risk of financial loss. Due to the high volatility of Bitcoin and Bitcoin futures (meaning that prices may fluctuate sharply), this risk of Bitcoin futures contract positions may increase,” said the US Securities and Exchange Commission. Wrote in an article in June.

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