And, since it is said, ‘Necessity is the mother of invention,’ the crypto space experiences innovative and continual technological developments.
Crypto ETFs have always been the pipe dream of the users of the blockchain since Bitcoin gained popularity and came into the limelight globally.
The report of a study ‘The 2020 Benchmark Survey of Financial Advisor Attitudes Toward Crypto Assets’ indicates that the financial advisors in the United States support investing money into Crypto ETFs.
You will normally come across two types of Crypto ETFs namely the Bitcoin ETFs and blockchain ETFs which may sound similar but are quite different from one another.
Now, the question is what is Bitcoin ETF and blockchain ETF and how exactly these are different from each other and are associated with Crypto ETFs on the whole.
Well, for that, you will need help from articles like this that speak about the differences in detail. Ideally, blockchain and Bitcoin are two terms that are often used interchangeably in the crypto space creating a lot of confusion.
Therefore, it is but natural that you will have little or no knowledge about Bitcoin ETFs and blockchain ETFs. Well, not anymore.
Bitcoin ETF vs Blockchain ETF – The Differences
Though both Bitcoin ETFs and blockchain ETFs complement each other, each of them, when taken in isolation, will appear to be starkly different from one another.
Apart from the difference in their names, there are lots of other differences between blockchain ETFs and Bitcoin ETFs.
Here are all those differences between these two different financial instruments enlisted for you in a clear and concise manner.
The blockchain ETFs have already been a hit since they made their debut into the mainstream market. It is a favorite among the investors because it has already proved its potential.
It is still done on a hypothetical and a virtual basis due to government restrictions and therefore has not made its way into the mainstream market. And, till now, there are no talks, future or forward, to launch it into the regular stock market.
This is not only because the crypto market is extremely volatile but also due to the fact that it has taken quite a few notable blows from the regulatory authorities as well as the government, of course. This has caused a lot of impediments in its launching.
On the other hand, blockchain ETFs are comparatively a much safer bet because the market as such does not face any strict regulatory restrictions and changes that may cause significant issues in its path of success.
Blockchain ETFs comprise those traded organizations that have blockchain technology ETF exposure. These companies may be those that utilize the technology directly or benefit indirectly from the services they provide to develop it.
Ideally, there are two major types of blockchain ETFs namely, Passively managed blockchain ETFs and Actively managed blockchain ETFs, both of which allow the general investors to put their funds into it.
On the other hand, the Bitcoin ETFs still look for the experts and big players to get on board and participate in it which is the main concern of the people regarding its future.
Path of Success
Blockchain technologies as well as blockchain ETFs have made their way into the top five regulatory markets in the world.
This includes BLCN or the Siren NASDAQ NexGen Economy ETF, the VanEck Vectors Digital Transformation ETF, the Capital Link NextGen Protocol ETF, BLOK or the Amplify Transformation Data Sharing ETF, and LEGR or the First Trust Indxx Innovative Transaction and Process ETF.
On the other hand, the Bitcoin ETF pool still has to be launched into the trading regulatory markets.
The main reason that most of the Bitcoin ETFs still cannot make their way into the stock market is that most of the applications regarding these Bitcoin ETFs that are put in by different companies are still awaiting approval from the relevant authorities.
The list of some of the popular Bitcoin ETFs of the equity asset class includes ARKW or ARK Next Generation Internet ETF, BITQ or Bitwise Crypto Industry Innovators ETF, and RIGZ or Viridi Cleaner Energy Crypto Mining and Semiconductor ETF.
It also includes a multi-asset class ETF namely the SPBC or Simplify US Equity PLUS GBTC ETF.
Considering the form of the blockchain ETFs as of now, these are comparatively less volatile in nature. This is because the markets in which these operate are not as volatile as the crypto market is familiar with.
In comparison, the Bitcoin ETFs are more volatile. Bitcoin, as such, experiences wild price swings, and also, as and when the Bitcoin ETFs are launched, these will be affected directly by the policies and regulations as laid down by the regulatory authorities regarding cryptocurrencies and Bitcoin.
As you may know that blockchain is a technology and therefore it is not linked with any product, such as Bitcoin, or any company as such. It is a large investment universe and is not constrained to any specific sector.
On the other hand, every Bitcoin ETF needs a blockchain to operate but a blockchain does not need a Bitcoin. Bitcoin here is a cryptocurrency and not a technology like the blockchain.
The regulatory status of cryptocurrencies, and also that of the Bitcoin ETFs as a result of it, is pretty unclear in a few specific jurisdictions in spite of the fact that Bitcoin futures are already offered on some of the leading crypto exchanges of the world.
Of late, the digital currencies have been seen to get involved in more than one regulatory battle.
These are usually heavily scrutinized since it is known that cryptocurrencies play a significant role in facilitating criminal and illegal activities such as money laundering and terrorism.
On the other hand, blockchain ETFs do not have to go through such issues primarily because the blockchain technology itself has won the approval of some of the major players in the industry, irrespective of their type.
Most importantly, this technology has been embraced by a lot of big names in the financial services industry as well. It is all due to the fact that the technology will not be banned and is not under strict scrutiny by the regulatory authorities.
As a matter of fact, the blockchain ETFs mainly track the market prices of the stocks of the companies that invested a significant portion of their fund in blockchain technology for their operations or to provide services that will develop blockchain technology on the whole.
This helps the tech companies in particular to simplify their operations and reduce the costs through decentralization.
On the other hand, most of the Bitcoin ETFs propose to track the price of Bitcoin via the ownership of those futures contracts that are tied to the future price of the crypto coin.
Which is Better – Bitcoin ETF or Blockchain ETF?
Well, to answer it in a few simple words it can be said that it is blockchain ETFs because it has already made its way into the mainstream market while the Bitcoin ETFs have not done so as of now and are still traded virtually.
Blockchain ETFs refer to an investment vehicle wherein people invest in the stocks of the companies with an exposure to blockchain technology.
On the other hand, as said earlier, Bitcoin ETFs are those that propose to track the ownership of Bitcoin futures contracts.
As of now, several proposals of Bitcoin ETFs have been rejected by the SEC or The US Securities and Exchange Commission because they felt there are issues with these proposals and would surely cause serious problems in the valuation and liquidity.
However, companies, as well as some critics, consider the Bitcoin ETFs to be the future of cryptocurrencies.
It will help in creating pools of funds just as any ordinary ETFs but will also offer daily updates on Bitcoin price and ETF news.
These ETFs differ from the individual crypto coin in terms of their fees, structure, exposure, and availability.
They support their opinion saying that Bitcoin ETFs will eliminate the risks and issues involved in buying Bitcoin, as a whole or even part of it.
This is because here the investors will not need to directly buy Bitcoin but still will get all sorts of news and updates along with day-to-day prices listings, both on the domestic and global levels.
Moreover, the recent appointment of the chairman of the SEC Gary Gensler, who is known to have a lot of expertise in cryptocurrencies, has made people more optimistic.
They hope that the proposals that are lying pending with the SEC until now will be soon considered and Bitcoin ETFs will be up and running in the near future.
On the other hand, there are several things that make blockchain ETFs stand out when compared with Bitcoin ETFs.
- First of all, since Blockchain ETFs are more like any average Exchange Traded Funds it is pretty much similar to any standard stock investment of companies of any sector of the industry.
- Secondly, the companies involved in blockchain ETFs are responsible for the profit or loss-making process directly.
- Thirdly, the blockchain ETFs cut costs significantly because they perform as a decentralized unit and involve a new technology in maintaining the transaction ledger.
However, investing in blockchain ETFs can be quite risky as well because in this category the companies involved are mostly tech startup companies.
This means that there are no substantial track records that may guarantee returns in the future.
More often than not, these startups companies are a regular defaulter on the financial aspects as well as in other related issues.
Add to that, due to several financial and non-financial factors these companies often hit a roadblock and global regulatory issues as well.
So, the gist of everything included in this article signifies that both blockchain and Bitcoin ETFs are good but the Bitcoin ETFs need some significant developments in order to be successful.
There are lots of weak links still existing in them which are pulling them from achieving greater success in the market.
Therefore, it is hard to say as of now which among Bitcoin ETF and blockchain ETF is better.
It all depends on your preferences, needs, and convenience when it comes to choosing one among them.
No matter whichever option you choose, just make sure that you find a reliable and reputed blockchain development company to go ahead with your investments and decentralized journey smoothly and expand your investment portfolio.
Both blockchain and Bitcoin ETFs are good options to choose by a crypto investor, provided the differences between them are known. If not, articles like this will be of great help not only to know about them but also to make the right choice.