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What are cryptocurrency ETFs? – A trading guide for 2019

Despite the popularity of exchange-traded funds (ETFs) and cryptocurrencies, crypto ETFs have not taken off as yet. According to the Securities and Exchange Commission (SEC) in the US, the launch of such funds will not happen until the crypto market becomes less volatile. However, it is still a good idea to prepare yourself for them once the regulatory agency approves them, as they do offer a range of opportunities while still protecting from market risks. This cryptocurrency ETF guide will provide you with relevant information about cryptos, ETFs and using the latter as an instrument for trading digital tokens.

  • Why crypto or blockchain ETFs haven’t taken off in the US.
  • The fundamentals of ETFs and cryptocurrencies.
  • A beginner’s guide to crypto ETFs.
  • The future of crypto ETFs

The fundamentals: ETFs and cryptocurrencies explained

ETFs are among the most popular types of investments today. In fact, its dramatic rise has inspired new investors to open a brokerage account. Vanguard, a registered broker-dealer, manages over $5 trillion worth of assets in ETFs alone. Its popularity is not surprising, as hedge funds and other modes of investments now charge hefty fees. Investors who trade stocks and other assets must pay fees per trade. In addition to brokerage fees and hidden fees from spreads, traders and investors also pay taxes on their profits.

  • ETFs are popular among new investors.
  • They offer low fees compared to trading stocks and a safer investing environment.
  • Cryptocurrencies are slowly becoming mainstream but are still volatile and unpredictable.

On the other hand, ETFs offer low fees and provide a safer investing environment. They are also popular among those who do not like to engage in active trading, even though ETFs are traded every trading day. One of the good things about these funds is their scope. You can choose from a large number of ETFs from various industries without the risk of holding individual stocks.

Cryptocurrencies are just as hot as ETFs. Bitcoin and Ethereum took the financial market by storm, and they are slowly becoming mainstream thanks to fintechs using them to transfer money internationally. However, the cryptocurrency market is volatile and, because of this, many investors try to shield themselves from additional risk by investing in cryptocurrency ETFs or avoiding anything crypto altogether.

Top 3 ETF Broker Comparison

1
of 14 ETF Broker Wealthfront
ETFs w/ discount
Custody fee 0,25%
Min. deposit $ 500
Trading from $0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 ETF Broker Vanguard
ETFs w/ discount 1800
Custody fee $20
Min. deposit $ 1
Trading from $1
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 ETF Broker Charles Schwab
ETFs w/ discount 250
Custody fee $1
Min. deposit $ 1.000
Trading from $1
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

Cryptocurrency ETFs guide

Cryptocurrencies are vulnerable to theft by cybercriminals online and are also subject to regulatory issues. Analysts say these are some of the reasons why ETFs have not taken off in the US yet. If you are interested in getting cryptocurrency ETFs, you will be mitigating risks associated with owning digital tokens.

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  • Cryptocurrency ETFs are traded like stocks every trading day.
  • The digital tokens of the cryptocurrency are split into shares.
  • Investors are entitled to a share of the profits they generate.

In theory, cryptocurrency ETFs are like other ETFs. They are traded like stocks on the stock exchange every trading day and are affected by price movements caused by the buying and selling of the underlying assets. An ETF tracks the fund’s underlying assets which, in this case, are digital tokens. Like shares of stocks, these tokens are split into shares. By investing in this type of ETF, you will indirectly own shares of these tokens and will be entitled to a share of the profit generated by their assets.

If you want streamlined processes and are interested in digital tokens, this type of ETF could be ideal for you. The fact that it tracks multiple tokens is a good reason to keep looking at cryptocurrency ETF lists. It also eliminates time and effort put into managing several digital wallets and trading all these currencies regularly. Cryptocurrencies and blockchain are also now being used for trading energy, eliminating voter fraud and keeping records for NGOs among others.

Difficult to find

Cryptocurrency ETFs are hard to find, as digital tokens are still a new concept. The closest investment vehicle available is the Bitcoin Investment Trust (GBTC), as it behaves like an ETF. For one, the trust owns tokens on behalf of shareholders and allows the shareholders to trade these shares. However, the sponsor of the GBTC charges hefty fees. Since it is the first on the market, the trust reportedly suffered from odd fluctuations in the recent past due to Bitcoin’s abrupt changes in value. Interestingly, the trust is nonintuitive regarding Bitcoin prices and has never been correlated to it. Looking at this picture is making things more confusing for investors interested in crypto-based ETFs, but there is some good news. The trust is only available highly qualified investors currently. This is good because you still have time to truly go in-depth with your blockchain ETF knowledge, making it possible for you to be ready by the time it goes mainstream.

Since they are hard to find, it is safe to assume that this is not yet the right time to invest in this kind of fund. As of August 2018, the SEC in the US made it very clear that it won’t approve this type of ETF until the cryptocurrency market shows stability and security. While the SEC is obviously not in favor of this type of ETF at the moment, the SEC’s position did not stop various parties from trying to launch blockchain ETFs.

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Lobbying from various groups

The Chicago Board Options Exchange (CBOE) asked the commission to reconsider its decision to block the sale of blockchain ETFs. After the CBOE lobbied the SEC last year, the SEC stated that cryptocurrencies are not yet ready to be included in the stock exchanges due to the fact that, as mentioned above, the markets are considered to still be too erratic and uncertain. Cameron and Tyler Winklevoss, founders of the digital trading platform Gemini, petitioned the SEC to approve their Bitcoin ETF as well. Based on reports, they tried twice, and both attempts were unsuccessful. Other prominent firms in the sector, such as Coinbase, have been working on their ETF-like funds as well. Coinbase came out with an index fund that offers four popular cryptocurrencies. However, Coinbase’s product is not an ETF.

The SEC announced in 2017 that it is open to approving crypto ETFs in the future, a welcome update for various groups that want crypto ETFs to be included on the stock exchanges. Various financial markets in Asia and Europe already have this type of fund available, as they operate under different regulations. American investors, on the other hand, will have to wait for the time being. If you are thinking of investing in a crypto ETF, you will have to wait for the SEC to approve them for listing on US stock exchanges.

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A beginner’s guide to crypto ETFs

Research: When it comes to cryptocurrencies, you will need to look at the various digital tokens available to find out which ones have the highest value, determine which are the emerging ones and see which ones you should avoid.

Open a brokerage account: If you haven’t opened a brokerage account yet, be sure to check out reputable broker comparison sites to find the right firm for you. Some of the best ETF dealers are Vanguard, iShares, and PowerShares. However, you would need to give them a call to ask if they already have crypto ETFs available. The answer is likely no, but it is still a good idea to contact them because they might have information on when those types of funds will be available.

Trading strategies and tolerance: You will have to look at your goals and your risk tolerance to see if ETFs are right for you. While they are appealing, investors are not alike. You should take into consideration the level of your investment expertise when deciding which type of trading you should do.

Access to international ETFs: Since cryptocurrency ETFs are not yet mainstream, you will need access to international ETFs or do a bit of digging to find a fund or even a trust that has digital tokens as underlying assets. Some of the emerging ones are KOIN, LEGR and BLCN. It is a good idea to do a background check if you are planning to invest.

1
of 7 Forex Broker Forex.com
Currency pairs 80 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 50
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 7 Forex Broker TD Ameritrade
Currency pairs 80 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 7 Forex Broker Interactive Brokers
Currency pairs 100 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 10.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 7 Forex Broker Oanda
Currency pairs 60 Currencies
Max. Lever 1:50
Trading size Micro-Lot
Minimum deposit $ 0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 7 Forex Broker Ally Invest
Currency pairs Currencies
Max. Lever
Trading size Micro-Lot
Minimum deposit $
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 14 ETF Broker Wealthfront
ETFs w/ discount
Custody fee 0,25%
Min. deposit $ 500
Trading from $0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 14 ETF Broker Vanguard
ETFs w/ discount 1800
Custody fee $20
Min. deposit $ 1
Trading from $1
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 14 ETF Broker Charles Schwab
ETFs w/ discount 250
Custody fee $1
Min. deposit $ 1.000
Trading from $1
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 14 ETF Broker Robinhood
ETFs w/ discount 3,000
Custody fee $0
Min. deposit $ 0
Trading from $0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 14 ETF Broker Betterment
ETFs w/ discount 0
Custody fee 0.25%
Min. deposit $ 0
Trading from $0
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 12 Stock Broker TD Ameritrade
National fees $6,95
Custody fee $0
Intl. fees
Dep. Protection $500.000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 12 Stock Broker Charles Schwab
National fees $4.95
Custody fee $0
Intl. fees $4.95
Dep. Protection USD 500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 12 Stock Broker Fidelity
National fees $4,95
Custody fee $0
Intl. fees $4,95
Dep. Protection $500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 12 Stock Broker ETRADE
National fees $6.95
Custody fee $0
Intl. fees $6.95
Dep. Protection USD 500,000
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 12 Stock Broker Interactive brokers
National fees $0.005 per share
Custody fee 0
Intl. fees $0.005 per share
Dep. Protection up to $30 million and $1 million cash (SIPC and Lloyd’s)
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
1
of 7 Crypto Broker Coinbase
Crypto currencies 8
Max. Lever 1:1
Min. deposit $ 50
BTC spread 0,5%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
2
of 7 Crypto Broker Forex.com
Crypto currencies 5
Max. Lever 1:2
Min. deposit £ 10
BTC spread 60
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
3
of 7 Crypto Broker TD Ameritrade
Crypto currencies 1
Max. Lever 1:1
Min. deposit $ 0
BTC spread 100
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
4
of 7 Crypto Broker Coinmama
Crypto currencies 6
Max. Lever 1:1
Min. deposit $ 0
BTC spread 5,9%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.
5
of 7 Crypto Broker Cex.io
Crypto currencies 8
Max. Lever 1:1
Min. deposit $ 0
BTC spread 0,2%
Go to Broker
Risk warning: Capital can be lost. Terms and conditions apply.

The future of crypto ETFs

As noted above, American investors have a very limited cryptocurrency ETF list of options and the only way to access them is to get international ones. If you do not want this option, you can look at GBTC and ask for their requirements for investors who would like to be part of the program. The requirements are stringent, but if you do get in, you will have the possibility to build your wealth through this trust.

  • Limited options of cryptocurrency ETFs currently.
  • Only international ones are available.
  • SEC’s decision on Bitcoin ETFs delayed until February 2019.

These are your only options currently, as it will likely take time before crypto ETFs are launched and made available on US stock exchanges. However, if or when this happens, you can be sure that crypto ETFs will have a significant impact on digital tokens and their market. In early 2018, the SEC reportedly looked at two digital token ETFs, but there is no news yet whether the regulatory agency will approve them. Bitcoin ETF hopefuls recently had their dreams put on hold when the commission announced that its decision on their application will not be released until February 27, 2019. This delay is in spite of Bitcoin ETF’s efforts in consulting the SEC’s Economic Risk Analysis division.

Analysts say that the delay was expected because the cryptocurrency market is not yet ready for the instrument.

Conclusion:

Conclusion

ETFs are some of the most popular investment vehicles around the world, as they offer much less hefty fees than hedge funds and they provide an investing environment which is much safer and mitigates the usual risks associated with typical cryptocurrencies, particularly with regard to cybercrime. The digital tokens are relatively unknown but have drawn in interest from many new traders and those who do not actually enjoy engaging in active trading. However, this does not mean that potential losses will not come into play, as ETFs also have their own set of risks and costs. In general, ETFs have market risks, trading risks and the like. It is very important that you take these into consideration before buying shares from a broker-dealer. It is important to be aware of these to ensure that you don’t get any surprises. Crypto ETFs are not yet available in the US, so even if you decide that now isn’t the right time to actually invest, it is certainly a good time to do some research into them to arm yourself with as much knowledge on blockchain ETFs as possible for when the SEC approves it. This could happen in the coming years when the cryptocurrency markets stabilize. Once this happens, you will finally be able to use your brokerage accounts to invest in these funds.