The United States Securities and Exchange Commission (SEC) is set to allow the first bitcoin futures exchange-traded funds (ETFs) to begin trading sometime next week. While the US regulator has yet to explicitly say so in a statement or a press release, it did have a tweet via its investor education account that said, “Before investing in funds that hold bitcoin futures contracts.” Make sure you carefully weigh the potential risks and benefits.”
Before investing in a fund that holds bitcoin futures contracts, make sure you carefully evaluate the potential risks and benefits.
Check out our Investor Bulletin to learn more: https://t.co/AZbrkpfn8F
— SEC Investor Ed (@SEC_Investor_Ed) 14 October 2021
Tweet does not specify ETF but cryptocurrency Enthusiasts read this as a sign that the SEC will approve bitcoin-backed futures ETFs that invest in bitcoin-based futures contracts instead of the cryptocurrency.
a different Bloomberg report, hours after the SEC’s tweet, it was said that the SEC is unlikely to block a bitcoin futures ETF, except for a last-minute reversal, which clears the way for trading to resume as soon as next week. This will increase the enthusiasm among the investors. .
What are Bitcoin Futures ETFs?
Exchange-traded funds or ETFs in the crypto world are essentially a portfolio of cryptocurrency tokens that track the value of a crypto-asset (in this case, bitcoin) and trade on stock market exchanges rather than cryptocurrency exchanges. They allow investors to invest in crypto assets without having to go through a cryptocurrency exchange.
So, the price of a share of exchange traded fund fluctuates with bitcoin price. If bitcoin’s value rises, so do ETFs, and vice versa. Bitcoin futures ETFs differ from bitcoin ETFs in that they are based on futures contracts and are filed under mutual fund regulations.
An increase in demand for bitcoin futures contracts is also anticipated, with exchanges in the US planning to increase the limit on the number of bitcoin futures contracts a firm can hold.
Meanwhile, the price of bitcoin crossed $60,000 (about Rs 45,18,378) on Friday for the first time in six months, following reports that a bitcoin futures ETF would be approved.
Cryptocurrency is an unregulated digital currency, is not legal tender and is subject to market risks. The information in this article is not intended to be financial advice, trading advice or any other advice or a recommendation of any kind offered or endorsed by NDTV. NDTV shall not be liable for any loss arising out of any investment based on any alleged recommendation, forecast or any other information contained in the article.