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ETF's are so pervasive because they're so easy. VIX futures can be held, but people still buy VIXY and similar products. You can buy literal physical gold, but
by mrsilencedogood 3y ago
ETF's are so pervasive because they're so easy. VIX futures can be held, but people still buy VIXY and similar products. You can buy literal physical gold, but people still buy GLD et al.
And it hardly matters that wrapping it in an ETF makes it potentially really weird (like how GLD and other gold ETFs are only barely nominally like holding gold, and VIX ETFs often hold cash-settled futures based on the value of a formula that is based on another formula that takes in various parameters of the prices and durations of options which themselves are priced based on the price movements of various equity securities and .........). The depths of weirdness have already been pretty well-explored by existing weird ETFs. A bitcoin ETF wouldn't even be particularly notable levels of weird, imo.
So, just the fact that it makes it really easy is typically a big boon to people getting exposure to whatever financial force the ETF holds.
- paxys 3y agoIt's the "it makes it easier" part that I am debating. Yes buying into a gold ETF is obviously easier because going out and buying physical gold takes more effort. But for a bitcoin ETF you are trading two clicks on one site vs two clicks on another. And in the ETF case you don't actually get to own any Bitcoin. So where's the advantage?
- samsin 3y agoI believe the argument is that it makes it easier for institutions like fund managers and businesses because they don't need to be concerned with custodianship.
- paxys 3y agoThat may have made sense 8 years ago, but the problem has long since been solved. Coinbase can act as a custodian for your Bitcoin. Fidelity has its own service for it, as does every other fund/brokerage/bank of its scale. You can buy it as part of your 401k.
- jbverschoor 3y agoCurrently, but recently accounting rules don’t make it very suitable for institutions.
- tromp 3y agoTwo click on the other site also doesn't get you to own any Bitcoin (as in, hold the keys).
- paulgb 3y agoNeither does an ETF, so I fail to see the line of argument here?
- initplus 3y agoBitcoin futures ETF's already exist - I'm not convinced that a spot price ETF is any huge breakthrough.
- sowbug 3y agoFutures ETFs own no Bitcoin. Spot ETFs would.
- paxys 3y agoPeople buying into the ETFs don't own the Bitcoin either way, so doesn't really make a difference to them.
- sowbug 3y agoYour original question was about price. Institutional demand in an asset generally reduces its open supply. That should affect the price.
- paxys 3y agoIf someone buying into the bitcoin ETF takes away the same transaction from Coinbase then the net result is the same.
- jcliff 3y agoOn the contrary, it makes a significant difference. Futures have to roll over monthly and there's costs associated with that. Depending on the slope of the futures curve, the costs can be high (10+%). Holding spot bitcoin solves this problem and makes the fund more palatable to advisors and institutions.
- initplus 3y agoTrading in derivatives still affects the price of the underlying asset. Sellers of BTC futures contracts are hedged by holding BTC.
- akira2501 3y agoThis all reminds me of someone explaining the reason World War 1 started.