An ETF stands for Exchange Traded Fund, and it is made up of a basket of securities that traders can invest in. This basket can contain securities based on sector, industry, geographic location, and more. ETFs can track a wide range of securities, ranging from commodities and forex to crypto, stocks, and indices. Let’s take a look at crypto trading. 

For example, the iShares MSCI UAE ETF is a fund that allows traders to gain broad exposure to a range of companies in the UAE. This targeted access to UAE stocks helps local or international investors to focus on the development and market performance within the region.

An ETF is a great way to naturally diversify one’s portfolio, and as we ride the drawn-out wave of cryptocurrency, we get a unique picture of how Crypto ETFs may just be able to change the world. Below, we examine what a Crypto ETF is, why people invest in them, and where you can find them.

What is a Crypto ETF?

A Crypto ETF is simply a fund that tracks a basket of crypto-related securities. There are several ways a Crypto ETF comes about. Firstly, it could be an ETF that tracks crypto-related stocks. Companies that mine cryptocurrency, develop blockchain technology, and more. Secondly, it could be an ETF that tracks cryptocurrency trading strategy. These are the funds that track the performance of a crypto’s futures contracts. Finally, one can invest in a Crypto ETF that is directly driven by the basket of coins themselves.

An example of an ETF that tracks crypto-related stocks is the Blockchain Technologies ETF. This fund helps traders capture the opportunity to invest in large-cap and emerging companies that are tied to the development of blockchain technologies.

On the other hand, an example of a strategy ETF is the ProShares Bitcoin Strategy ETF. This is a fund that tracks the performance of Bitcoin by tracking Bitcoin futures contracts. This makes its market value related to the price of Bitcoin, but traders do not gain direct exposure to the Bitcoin price performance.

Why do people invest in Crypto ETFs?

As we have just seen, Crypto ETFs come in many forms, and in forms that we may not consider in the first place. That is one of the reasons why people invest in them – for this flexibility in assets they can speculate on. Other reasons are as follows:

Not directly participating in crypto trading

For some, not directly participating in the crypto market is an advantage. This is because it takes extra steps to set up hot or cold wallets and to become familiar with crypto exchanges. Many people do not want to bother with learning the ropes of another system, nor do they care for blockchain technology, public and private keys, and so on.

When one purchases a Crypto ETF, they can do so through their regular broker, if their broker provides the asset they want to trade. This makes it easy for traders who are already participating in other markets to join in on the speculation. It also means that their cash can be used interchangeably, and they do not have to worry about checking up on multiple accounts around the Internet.

Effortless portfolio diversification

One of the best things about ETFs is that they naturally offer diversification for someone’s portfolio. This is because they track a basket of securities instead of just one. This means that should one stock or one cryptocurrency perform poorly in the market, the trader will not be risking his entire capital. There will still be other related stocks and coins to balance it out and lighten the load on the trader. This reduces the risk of investing for many traders.

Safety and Security

Finally, one large concern that a lot of traders may have about crypto is that it can be risky or dangerous to store a large amount of money in a hot or cold wallet. There is only one private key, which makes it easy to forget or misplace. There is also the problem of security breaches. Though the technology used in the blockchain is very advanced. There is generally nothing to worry about. However, there have been cases in the past where traders have lost their capital and coins because of others’ misconduct.

Additionally, when you trade crypto directly, you are essentially trading without any intermediaries. This is because the crypto exchange is a peer-to-peer marketplace where there is no need for any middlemen. This could cause problems for those who are out to misbehave. With ETFs, you buy and sell through the ETF provider. This is most often a licensed and reputable broker. You can also make sure that your funds are properly stored. There is high physical and digital security at times you are not trading.

Are Crypto ETFs regulated?

Cryptocurrencies are not regulated, and anybody can tamper with them if they have the technology to do so. However, Crypto ETFs are regulated by their issuer – most often, this is the regulated ETF provider or company, for example, Saxo UAE. This can give traders greater peace of mind, knowing that all parties involved in the transaction are reliable. It also lowers the risk of any risk related to theft or malpractice.

Where can I find Crypto ETFs?

If you are interested in trading Crypto ETFs, you can start an account with your broker. Be careful when you choose your broker. Always make sure they offer the instruments you want to trade. Including the Crypto ETF, you’re interested in. You can do this by visiting their product page or by navigating through any platform demos that they offer. This is also a good opportunity to become acquainted with the broker and its platform.

You can also speak to a professional member if you feel so inclined or need help. They will be able to guide you to the right page. They will also be able to log queries for you to come back to.

One thing is for sure. Aside from checking the offer you the instruments you want to trade, you should also ensure that they charge reasonable fees. Look out for hidden fees that may not have been communicated upfront. Also, ensure their transactional fees are reasonable.

Examples of Crypto ETFs

Based on the above product page from Saxo, we can see that there are indeed a lot of ETFs, ranging from big names like Bitcoin, Ethereum, and Litecoin. There are also smaller ones, such as Tron crypto, Avalance crypto, and Polkadot crypto.

Getting started trading Crypto ETFs

To get started trading crypto, you should open a live account with your preferred broker. You should identify your needs, verify your information, and you can get started. You can then find a list of ETFs traded on the market and will gain access to their live price charts.

The bottom line

Aside from the kinds of Crypto ETFs certain brokers provide, you should also make sure you know how ETF trading works and that you understand how the crypto market is faring well. You should always remember that there is no such thing as guaranteed profits, which is why you should be careful with your hard-earned money before you start investing.

To learn more about crypto trading, check out Is Cryptocurrency more profitable than forex?