Bitcoin ETF allows investors to obtain a bitcoin price opening through a common securities account without having to open an encrypted transaction account on their own or managing wallets and private keys. With the approval of a spot bitcoin ETF by the United States in early 2024, such products rapidly attracted large amounts of money and became an important gateway to the Bitcoin market.
Cash ETFs are closest to spot prices
The spot bitcoin ETF is held directly in bitcoin and is therefore most closely associated with the spot price. Such products are usually the most direct option for investors who wish to allocate bitcoin through voucher accounts and do not intend to host their own assets.
ETF shares are traded on the exchange like ordinary shares and can be included in voucher accounts and retirement accounts. Compared to direct currency holding, investors have gained a more familiar entry point, but have abandoned the chain of self-custody and all-weather trading capabilities.
Futures ETF long-term or off-the-shelf
Futures Bitcoin ETF does not hold real bitcoin, but will have a bitcoin futures contract listed on the regulated exchange. It indirectly tracks bitcoin prices through derivatives, which were approved earlier than the current ETF and launched as early as 2021.
Futures contracts, however, have maturity dates, and the Fund needs to continuously sell contracts that are close to maturity and buy further months of contracts. This process will entail extended costs, especially when the price of a long-term contract is higher than that of a recent one. When held on a long-term basis, this part of the cost may result in futures ETF performance lagging behind the spot in bitcoin.
E.T.F. Proceeds-for-Red-Upspace
The revenue-type bitcoin ETF has increased in recent years. Such products usually hold a bitcoin opening, then sell the relevant options, collect a right and distribute a share of the income to the holder.
It is characterized by more stable cash returns, but at the cost of increasing space constraints. If bitcoin is growing fast, it is often difficult for such funds to keep up with the current increase. As a result, the earnings-type ETF prefers to pursue a split investor rather than a group of people who wish to participate fully in the rise.
Requisition for ransom to keep the price close.
The price of Bitcoin ETF was largely close to that of the assets, relying mainly on the mechanisms of requisition and foreclosure. Large authorized financial institutions will arbitrate when the ETF market value deviates from the net fund value.
If the ETF price is higher than the value of the asset held, participants are authorized to deliver cash or bitcoin to the Fund in exchange for a new share and to sell it, thus reducing the premium. In turn, if ETF prices are below net, they can redeem shares, reduce market supply and facilitate price return.
Overall, the three types of bitcoin ETF are oriented towards different needs: spot ETFs place greater emphasis on price tracking, futures ETFs provide indirect openings, and earnings-type ETFs have a main distribution point. They are not a substitute for each other, and the choice depends first on whether the investor wants price performance, trade facilitation or cash gains.