What is a Bitcoin (BTC) ETF?
Is there a Bitcoin ETF in Europe? What is the regulatory framework applicable for such an investment tool? Let’s take a look at the meaning of the name « Bitcoin ETF » in Europe, particularly the importance of the regulations behind an ETF.
ETFs or Exchange-Traded Funds are funds that operate much like traditional funds. ETFs provide exposure to a wide variety of asset classes and niche markets, but are, unlike traditional funds, particularly easy to access for individual investors. Indeed, ETFs are traded on the stock exchange and quoted continuously.
To be more specific, one of the main differences between a traditional fund and an ETF is that ETFs can be bought or sold continuously throughout the day, like stocks, while traditional funds can only be purchased once. times per day or per week based on the net asset value (NAV or “Net Asset Value” in English).
In addition, investing in a traditional fund sometimes imposes a minimum amount as well as generally higher fees.
Can you invest in a Bitcoin ETF?
Investors now have more ways than ever to invest in Bitcoin. In addition to directly purchasing bitcoins, investors are also looking for other means from traditional finance to benefit from exposure to Bitcoin.
Despite the recent difficult environment for cryptocurrencies, interest in bitcoin and the blockchain economy continues to grow, and investment options in the Bitcoin ecosystem continue to multiply.
For Bitcoin, the first initiatives came from ETCs and ETNs.
Exchange Traded Certificates (ETC) and Exchange Traded Notes (ETN)
ETCs and ETNs are debt securities traded on an exchange. The issuers of these debt securities (investment banks for example) undertake to pay the return of the underlying index.
Many contracts and notes exist around Bitcoin, however, they can present a high counterparty risk, and do not follow UCITS regulations and thus are not necessarily available in securities accounts and life insurance.
What does the UCITS framework bring to a Bitcoin ETF?
Security: a UCITS ETF has several levels of security. It must be traded on a market authorized and regulated by a European regulator (such as the AMF) and comply with all the rules of the UCITS directive.
Simplicity: No cryptocurrency wallets, offshore entities, hack-prone exchanges, or minimum investment amounts.
Minimal counterparty risk: assets are held by an independent, regulated entity and not by the investment manager.
Eligibility for traditional tax-advantaged investment packages such as life insurance and retirement plans.
ETF Types and Investment Styles
ETFs can be managed actively or passively, in the first case a portfolio manager actively makes decisions, while in the second case the strategy simply involves following a more or less complex index.
ETFs make it possible in particular to isolate and monitor an identified niche in the market. For example, thematic ETFs aim to identify long-term transformational trends (“megatrends”) and investments likely to benefit from them if they materialize…as in the case of the crypto industry.
Why focus on a megatrend? Rather than focusing on specific companies or sectors, thematic investing aims to predict long-term trends in the market.
Therefore, in a single transaction, investors have the opportunity to capture the potential of one or more themes/megatrends that may change or drive a new industry. This is a tool that allows you to easily customize any portfolio and become an additional source of diversification.
Les ETF (Exchange Traded Funds) Bitcoin
Given the higher degree of protection and transparency, the demand is very strong, but the subject is more complex. Indeed, as explained in the first part, an Exchange-Trade Fund (ETF) is necessarily a UCITS fund, which imposes certain constraints.
The UCITS framework requires in particular a diversification of assets, hence the impossibility today of finding a pure Bitcoin ETF in Europe
The Best ETFs for Global Dividend Stocks
Investing in stocks with high dividend yields is considered a solid investment. Dividends are generally paid by profitable and well-established companies. For investors looking for regular income during times of low interest rates, dividend stocks can offer attractive returns.
There are different index concepts available for investing with ETFs in high dividend stocks globally.
