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Thursday, August 23, 2018

We realized a lot of people have been too scared to ask - what the hell is a Bitcoin ETF!? Here's all you need to know...

There's definitely a thing in the cryptocurrency world where everyone has to pretend to know everything.  I've seen a lot of heated online arguments where people are going back and forth, then there's a strange pause where you know someone took a minute to Google a term their opponent used so they could reply pretending they knew the whole time.

I knew the basics of what an ETF was, but only because I played around in the traditional stock market a bit before cryptocurrency grabbed my full attention.

Then during a recent conversation with some of my very bright friends here in the Silicon Valley tech world where they confessed they have no idea what an ETF is, I realized a lot of crypto investors have never invested in anything else - so this "ETF" thing we keep talking about is a new term to them.

So for everyone too afraid to ask, and those who tried to look it up... but only found 10 page long answers - here's the "what you need to know" on ETF's from experts in the field.

I reached out to some of the most respected people in the world of finance, and asked them share the most important things those of us in the crypto world should know - before our two worlds come together (assuming a Bitcoin ETF gets approved soon - personally I think it will happen before the end of the year).

Lee Kranefuss, CEO of The Kranefuss Group told me:

"One of the things that makes stock stock is that it trades, all day, on a stock exchange. This is a central place for buyers to find sellers and vice versa (at least virtually).

An ETF is nothing more or less than a stock that allows the same thing. The difference is that an ETF isn't a company that makes widgets, or provides services. It simply invests in one or more other things - like stocks and bonds in companies.

So, with an ETF, you are buying (maybe) a fund that holds 500 stocks, or at the other extreme a security that invests in crude oil, or (possibly) BitCoin. (The latter, by the way, would technically be Exchange-Traded Products, or ETPs in the U.S. due law; in Europe they could be ETFs)."

President of ProChain Capital, David Tawil explained it to me like this:

"An ETF enables easy investment in assets. The ETF is listed on a stock exchange and given a ticker. The assets included in an ETF can range from liquid assets, that an investor could easily invest in directly, such as stocks, but the ETF might offer the valuable feature of being diversified or targeting a particular industry or geography. Additionally, as it relates to Bitcoin and other crypto-assets, an ETF can offer investors a very easy way to invest in those assets, which are otherwise difficult or administratively challenging to access. The bottom line is that a Bitcoin ETF should create massive additional liquidity in Bitcoin (or other crypto-assets, to the extent that they are included)."

And Morris Armstrong, founder of Armstrong Financial Strategies added this important note:

"An ETF can be something that simply tracks the value of either one or many cryptocurrencies and is traded throughout the day. If you own the Exchange Traded Fund, you do not own the underlying crypto assets but you can make a profit or loss on the way those assets move."

I think that about covers it!  If you have any more ETF related questions you'd like me to ask the experts, drop me a line!

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Author: Ross Davis
E-Mail: Ross@GlobalCryptoPress.com Twitter:@RossFM
San Francisco News Desk