Bitcoin has recently seen an upward surge in price in the last 52 weeks. One factor causing this increase is Blackrock's application for a spot bitcoin ETF already being accepted by the United States Security and Exchange Commission (SEC)
While ETFs had been available in the stock market since the 90's. Creation of an ETF specific for a cryptocurrency will be a first. Not only will this increase adoption of Bitcoin and other cryptocurrencies but it will also provide investors with new favorable opportunities including more afforable investment options. News of their application gaining momentum caused excitement for traders and investors alike and gave rise to the price of bitcoin to soar this past year.
Let's go over a few key details on what we need to know about this ETF and what opportunities and risks it could bring should it get approved.
The company that owns the World.
Blackrock is the largest asset manager in the entire world with over 9 trillion US dollars of assets under management. Blackrock is a major investory in companies all around the globe. These includes top tech companies like Apple, Amazon, Google and Microsoft. (Vanguard is second with over 7 trillion)
This amount of wealth attracts not onlythe worlds top investors, but holds a significant degree of influence for people in power. While there's a lot of opposition in getting a BitCoin ETF approved. If there's one company that can do it, it will definitely be BlackRock.
What is an ETF
An exchange traded fund (or ETF) as the name implies is simply a fund which can be used to buy/sell a particular index. An advantage of investing in ETF as opposed to buying a specific stock is that it lowers risk and exposure since you are buying into an index. It allows you to automatically diversify your portfolio.
A simple analogy for me is that when buying a stock you're buying a slice of a pie. But when investing in an ETF, your fund is pooled together with other investors allowing you to buy parts of a slice from multiple pies.
An ETF is attractive because generally they are more affordable making the barrier to entry easier for regular folks. As mentioned above and for regular investors, buying ETF helps easily build a diversified portfolio.
Another attraction of an ETF is that it pays out high yield dividends. You can look into the more popular ones as an example like the Vanguard ETF (VOO), JP Morgan's ETF (JEPI) as well as QYLD that covers the NASDAQ top 100 companies.
Please make sure to do your own research before investing.
What will BitCoin ETF Bring
If this gets approved, and with BlackRock leading the way, this will unlock billions of dollars in investment opportunities which were not available before. You can think of banks, investment institutions, hedge funds etc. will be lining up to join the party.
And that is just the beginning. It is assumed that there will also be an increased adoption in BitCoin as getting an approval would somewhat mean recognition of legitimacy; and with this regular investors and institutions will most likely be interested to invest. With billions of money waiting to be invested, this in return would significantly cause the price of bitcoin to sky rocket.
One potential risk however, is that once these new players arrive they could create increased market volatility. Those with bad intentions can create uncertainty if they have deep pockets to influence market movements.
So will you be investing in BlackRock's BitCoin spot ETF once it becomes available? Why or why not?
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