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The campaign for an Exchange-Traded bitcoin fund has been going on for almost 4 years without success. However, things might seem promising for cryptocurrency traders as closed-end funds; much similar to ETFs could be in progress. While talking about Bloomberg, Cathie Wood, executive director of ARK Investment Management, said that a bitcoin ETF will come into play in at least two years, possibly accompanied by a handful of "education."
The proposed bitcoin fund will allow investors to trade financial securities related to bitcoins without necessarily owning bitcoins. ARK Innovation ETF, which operates the first exchange-traded US cryptocurrency fund, accesses cryptocurrency through the Bitcoin Investment Trust. The ILO is an investment vehicle that allows investment in bitcoins, deriving its value from the price of bitcoins. BITs are liquidated in GBTCs after a holding period of one year and sold to the underlying investment funds.
The GBTCs have a higher premium on bitcoins. However, they are a much better investment because they offer greater benefits compared to the direct purchase of bitcoins. With GBTC, investors have a titled and audible property. Shares may be held in tax-advantaged accounts, such as IRA, and are publicly traded. In addition, investors benefit from a network of trusted service providers.
What is a closed-end fund?
The closed-end fund (CEF) is an investment structure that invests in portfolio securities and whose shares are traded on the open market. CEE mobilizes capital through an IPO. However, unlike other funds, capital in mutual funds does not flow regularly. CEFS does not trade shares on the daily and does so rather on an exchange with the market determining its price. CEE operates in the same way as ETFs, but is not an ETF.
Some of the common features include an underlying portfolio of net asset value investments, leveraged portfolios, and day trading exchanges, expense ratios, and capital gains and income distributions. .
The difference lies in the fact that an EFT has a special creative function that protects it from a significant deviation from the net asset value whereas the CEFs do not use a such characteristic. EFTs track the performance of the index while CEFs must be actively managed.
Why an ETF is not long-distance
For a Bitcoin ETF to be approved, the fast-growing currency may need a regulated ecosystem. A federally regulated ecosystem for derivative products using cryptocurrence opens the market to a larger customer base. Ms. Wood is convinced that the Securities Exchange Commission could be the regulator since it regards bitcoin as a financial guarantee.
Wood understands the need to have bitcoin categorized as a currency, reiterating that cryptocurrencies have a lot on fiduciary currency. This in response to JPMorgan Chase & Co.'s CEO, Jamie Dimon, remarks calling crypto-currencies "fraud".
The speculative birth of a bitcoin fund stung the interest of Wall Street's competitors and many saw an excellent opportunity. Goldman Sachs Group Inc. President and CEO Lloyd Blankfein has openly expressed interest in this move, which is encouraging for Wood as it will bring more liquidity to the market.
An exchange of crypto assets and the development of futures and derivatives by companies like Goldman Sachs will help strengthen the ecosystem. A move that Wood believes will prompt the SEC to come as a regulator.
The increase in the number of financial products traded on cryptocurrencies in regulated exchanges has also opened the door to a myriad of investors who are paving the way for an ETF. Speculation for a Bitcoin fund may spark the excitement of a Bitcoin ETF that may affect the price upward. Bitcoins that are currently trading at $ 5700 could undergo a correction of 50% within a year.
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