The largest cryptocurrency in the world is Bitcoin. It’s already attracted the attention of large institutions and individual investors alike. One of the major parts of the allure is that crypto, or virtual money is catching on rather quickly. The…
The largest cryptocurrency in the world is Bitcoin. It’s already attracted the attention of large institutions and individual investors alike. One of the major parts of the allure is that crypto, or virtual money is catching on rather quickly. The 2020s look like the decade in which much of the world’s economy will be denominated in this new kind of money. For anyone with in interest in getting a share of the profits, there are several ways to get on board. Besides the obvious, which is the rather tricky affair of purchasing and securing BTC in a digital wallet and hoping it isn’t hacked, you can buy into an exchange traded fund (ETF) that’s backed by the virtual currency. Here’s more about how those funds work, why contracts for difference (CFDs) are likely a smarter option, and the downsides of the crypto funds.
How Crypto ETFs Work
Exchange traded funds have been around for quite some time, but only now are they venturing into the cryptocurrency business. Stock market elites were resistant at first, but in just the past couple of years, a half-dozen funds have cropped up. The thing they all have in common is that they hold offline Bitcoin as their primary assets. When you purchase shares in one of these virtual currency ETFs, you don’t have to worry about all the security issues that come with owning the new form of money, and those risks are quite high. That’s because many online storage wallets for cryptocurrency have been hacked into and lost millions in assets. Apparently, a market-backed fund helps people side-step this problem. So, what about those who don’t want to buy BTC directly or get into an ETF?
The Best Alternatives
There are plenty of alternatives to the rather risky strategy of buying BTC outright or buying shares in a cryptocurrency exchange traded fund. Fortunately, many investors have discovered how to employ the simple strategy behind CFDs. The huge advantage of CFDs over direct crypto purchase or using an ETF is that you can potentially profit from upwards as well as downwards movements in price. Popular CFD platforms, like Easy Markets, offer traders all the benefits of Bitcoin investing without the drawbacks. The main reason is that a contract for difference does not require that you hold the asset itself. You’re actually just making an educated guess about which direction the value of BTC will go.
The Downsides of Bitcoin ETFs
The disadvantages of holding your virtual currency via an exchange traded fund are many. For starters, there are the high management fees, some reaching up to the level of almost three percent. That’s a large chunk of cash to part with just for the luxury of holding a new form of money. Second, the funds don’t necessarily track the alternative currency you’re interested in. Some trade in BTC, but others follow Ethereum, Litecoin, and others. For many who want into this market, the lure of the largest player, Bitcoin, is that it’s not only volatile but has the potential to do well as the global economy continues to accept alternate types of payment.