Crypto ETFs Continue to be Popular Across Europe: Why?

By now, no new or experienced investor will be able to overlook the indomitable significance crypto holds for the modern, diversified investment portfolio. For anyone looking for a strong financial return, simply going online and checking the price of Bitcoin right now would be enough to make any investor drawl. 

While it is currently 70% down, the valuation of Bitcoin has dramatically improved since its launch back in 2009, with other cryptocurrencies like Ethereum not far behind. This is why the launch of ETFs back in August 2021 was such a turning point. Now, instead of actively buying Bitcoin, investors have a way to speculate on Bitcoin without fully investing in the cryptocurrency itself. 

So Why Has This Been Introduced?

Despite its introduction to the world taking place over a decade ago, the rise of cryptocurrency has appeared to take many by surprise. For some, the new technology –even the concepts of a decentralised currency and transparent blockchain investments are a step too far from the traditional, centralised form of finance to which we are all accustomed. 

That being said, it is undeniable that crypto is the future. Over the next few years, we will begin to see the introduction of Web3, the next phase of the internet which will run on purely decentralised systems, fully utilising the digital currency tool that has so far been exemplified by Bitcoin and Ethereum. Investors have an eye for the future, of course, and right now that is undeniably heading down a road to the blockchain. 

But crypto ownership has its own costs and complexities beyond the initial expense and not everyone is ready to take on that financial commitment. For those who are yet to fully grasp the more detailed concepts of ownership but appreciate the growing significance crypto has for the diverse investment portfolio, an ETF (which stands for “exchange-traded-fund”) can be an advantageous alternative.

Are ETFs Easier to Get Into?

Yes and no. Unlike buying and investing in a particular cryptocurrency, it will track and purchase the coin for you, offering fractionalized shares of the holdings which can then be traded on the traditional market exchanges. The price of a share would then change akin to the price of the coin. If the price of Bitcoin increases or decreases, the ETF would acclimatise and adjust itself accordingly. 

What Are the Advantages?

With the move towards Web3, as well as several updates to crypto’s system, such as the new proof of stake scheme being piloted by Ethereum, it is easy to predict the wealth of benefits that will come with crypto’s inevitable rise in price. An ETF allows access to that financial potential by giving investors a way to gain shares with a traditional method. This is important, as although trading crypto is the future, there are some who are still averse to change. They would like to become involved, but ETFs give them the ability to dip their toes in the water, rather than submerge themselves fully (which is something that will inevitably happen when everyone realises crypto as the future). Not only this, but we are seeing a rise throughout Europe from those already bought into a blockchain. 

What Are the Other Reasons ETFs Are So Popular?

Crypto ETFs are designed to allow more people across the globe to invest in Bitcoin without actually buying it. They also eliminate the need for the usual security procedures. Typically, if one were to purchase Bitcoin, there would be security keys that one would have to safeguard. This is a secure way to keep your coins from being hacked or stolen. 

With an ETF, however, you do not have to store or move keys at all. You do not own any cryptocurrency, only the shares of the fund, which will store the keys for you. It is not necessarily safer or more secure, but because it is regulated by financial vehicles and approved by regulatory authorities, it gives the sense to those still hesitant about crypto that their investments are safe. 

Is There Anything Else To Be Aware Of?

There is a lot more to know about ETFs, one being that an ETF will give an investor a relatively wide scope with diversification of assets. For instance, one ETF could comprise multiple stocks which are growing in popularity across Europe, such as Nvdidia, Amazon and Mastercard; all of which gives investors a way to expand their equity portfolio whilst averting the risk with the opportunity of return. Tax wise, too, a Bitcoin ETF is traded on traditional exchanges, which makes them eligible for tax efficiency. 

Of course, it is not all plain sailing. Negatives like administrative fees and inaccuracy make researching an ETF critical before investing, but the positives appear to be enough to keep people investing in them. They continue to grow across Europe, and with more and more people aware and involved in Crypto, we can only expect their popularity to soar further.