Need high investment-based returns? Maybe, it’s time to give cryptocurrency exchange-traded funds a shot… | The Financial Express

Need high investment-based returns? Maybe, it’s time to give cryptocurrency exchange-traded funds a shot…

Insights from market analysts have highlighted that owning cryptocurrency ETFs can save investors costs such as custody fees and transaction-based costs

Need high investment-based returns? Maybe, it’s time to give cryptocurrency exchange-traded funds a shot…
As stated by ETFGI, an amount worth $20.23 billion was invested in cryptocurrency ETFs and exchange-traded products (ETPs) listed globally at the end of November, 2021

Global markets and corporations seem to be on the lookout for the next big trend which would benefit their Return-on-Investment (ROI) in decentralised markets, and cryptocurrency exchange-traded funds (ETFs) is believed to be the answer! According to experts, a cryptocurrency ETF can help track the price of more than one digital token.

As stated by ETFGI, a capital market company, an amount worth $20.23 billion was invested in cryptocurrency ETFs and exchange-traded products (ETPs) listed globally at the end of November, 2021. The company further mentioned a 3.7% increase in cryptocurrency ETFs and ETPs from $19.52 billion at the end of October, 2021. “Cryptocurrency ETFs either own cryptocurrency futures, options, or other cryptocurrency-based securities, unlike traditional ETFs that directly own the underlying asset. The idea is to mimic the price fluctuations of the underlying cryptocurrency. However, there may be times when the movements of the ETF do not exactly correspond to the movements of the underlying cryptocurrency because they do not hold any of it themselves,” Sathvik Vishwanath, co-founder and CEO, Unocoin, a cryptocurrency exchange, told FE Blockchain.

Insights from market analysts have highlighted that owning cryptocurrency ETFs can save investors costs such as custody fees and transaction-based costs. According to Corporate Finance Institute, an online finance-based education platform, investment in cryptocurrency ETFs can provide the advantages such as simplify the process of Bitcoin-based investments, help investors diversify their existing equity portfolios, and ensure tax efficiency. Some have even speculated that the launch of a Bitcoin ETF could boost the next big Bitcoin-backed rally.

“Due to general market conditions, cryptocurrencies will occasionally rise and fall together but specific assets inside the cryptocurrency ecosystem may also move independently. This also reflects that regulators can monitor and analyse their performance and protect against price manipulation within the ETF markets. ETFs are considered to be low-risk investments because they are low-cost and can hold a basket of stocks or other securities,” Sakina Arsiwala, co-founder, Taki, a global cryptocurrency-based social network, stated. 

Reportedly, companies such as Fidelity Crypto Industry and Digital Payments ETF (FDIG), VanEck Digital Transformation ETF (DAPP), Global X Blockchain ETF (BKCH), Bitwise Crypto Industry Innovators ETF (BITQ), among others, are some of the companies which have inculcated cryptocurrency-based ETFs to their ecosystem. On the basis of reporting done by CoinMarketCap, a cryptocurrency price-tracking website, by June, 2022, a research report by National Bank Financial found that Canada boasted around 40 cryptocurrency ETFs such as Bitcoin and Ethereum funds, and the sector recorded a total asset value of $4.3 billion.

Moreover, while it is anticipated that the lack of cryptocurrency regulations can have an impact, market analysts believe that cryptocurrency ETFs can bring a new investors’ class to benefit digital asset adoption. As mentioned by NerdWallet, a personal finance company, the Securities and Exchange Commission (SEC) has expressed concerns around potential manipulation and fraud that could come with Bitcoin ETF approval. However, foreign exchanges do not seem to share the same point-of-view with SEC on Bitcoin ETFs.

“The regulatory framework for cryptocurrency in ETFs is still being worked on but demand for the same is also increasing. Investors must be aware of the token options available before investing along with addressing any security concerns,” Prashant Kumar, founder and CEO, weTrade, a cryptocurrency platform, highlighted. 

Also Read: From SaaS to BaaS; how blockchain-as-a-service can benefit the global scenario

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First published on: 21-11-2022 at 08:00 IST