For much of the cryptocurrency era, purchasing digital assets required navigating cryptocurrency exchanges. However, this is starting to change.
If you’ve been reluctant to enter the crypto space due to the complexities of using exchanges, now might be an ideal time to explore new spot exchange-traded funds (ETFs) available to investors.
What Are Spot ETFs?
A spot ETF is a financial product that offers exposure to the price fluctuations of an underlying asset—such as cryptocurrencies like Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH)—without actually owning the asset itself. These ETFs are traded on traditional stock exchanges, and their value reflects the current (or spot) price of the cryptocurrency.
Unlike holding the actual cryptocurrency, where you need to manage its storage and security using digital wallets and private keys, spot ETFs transfer this custodial responsibility to the fund manager. This simplifies the investment process by eliminating the need for investors to handle the complexities of secure storage.
Spot ETFs function similarly to gold ETFs: when you invest in a gold ETF, you don’t receive physical gold but rather shares that track gold’s price movements.
Another key difference is trading hours. Cryptocurrencies can be traded around the clock, but spot ETFs are subject to stock market trading hours. This limitation means you can only trade ETFs during market hours, potentially missing out on significant price changes that occur outside of these hours.
Current Options
At present, the available spot crypto ETFs focus on Bitcoin and Ethereum. These cryptocurrencies are prominent due to their substantial value and established histories, making them prime candidates for ETF inclusion. Bitcoin, known as digital gold and the first cryptocurrency (created in 2009), was the first to receive approval for a spot ETF. With nearly seven months of trading, the approval of 11 spot Bitcoin ETFs is considered one of the most successful ETF launches ever.
More recently, nine spot Ethereum ETFs received approval from the Securities and Exchange Commission (SEC) to begin trading on July 23. As the second-largest cryptocurrency and a cornerstone of the decentralized finance (DeFi) sector, Ethereum was the logical choice for the next spot ETF launch.
