Due to the booming market price of Bitcoin (BTC), cryptocurrency is becoming popular among various investors but most of the investors hesitate to directly involved and invest in the cryptocurrency due to the myth of loss if you are also one of them so this article is waiting for your reach. Today we come and bring solutions for all those investors who don't want to directly invest in (BTC) cryptocurrency. So here they can go for the (BTC) futures (ETF) is the process in which can gain exposure to Bitcoin's price movement with the help of future contracts. So today in this article we will discuss What is a Bitcoin Futures ETF and Future Contracts as well as its advantages and disadvantages. So let's get started from scratch!
What Is a Bitcoin Futures ETF?
A Bitcoin (BTC) futures ETF is a way through which investors can bet on the future price of BTC without owning it itself. This is the process in which the investors analyze the past performance or market history of (BTC) called technical analysis. Based on the technical analysis they assume the future price of (BTC) and then bet on it. If their assumptions will be correct then they can generate revenue from here else they could bear a big loss.
ETF could be risky sometimes because we all know the cryptocurrency market is highly involved and a sudden dip can completely harm the investors. Here, due to fluctuating nature of cryptocurrency sometimes the past experience and the technical analysis have also not gone good or enough to assume its future market cap of it. So, it is completely up to the behavior of investors how they deal with any specific cryptocurrency. Let's understand this with a past example; almost all of the investors know about "The Kraken Ethereum Flash Crash" if not then let me clear it to all of you. The flash crash appeared on May 7, 2021, on the reputable exchange Kraken, in this crash an anonymous user sell a large amount of Ethereum (ETH) using Kraken exchange. The value of (ETH) became very low due to the sudden selling of a large amount of (ETH) and as a result, most of the investors lost their positions and bore a big loss because they were not expecting the same thing that arose. The purpose to explain this example is that sometimes things do not go on the basis of past market cap or technical analysis, in the world of crypto decisions could be terribly worst at any time, so the best solution is never to invest more than you bear in case of loss.
What Is a Future Contract?
The investors invest in a (BTC) futures ETF agreement to buy or sell (BTC) at a certain price in the future called a futures contract. These contracts are traded on regulated reputable exchanges such as Intercontinental Exchanges or Chicago Mercantile Exchange and the investors can bet on the future price of Bitcoin by investing in these future contracts.
There is various type of futures contracts that can be traded on regulated futures exchanges, such as:
- CME Bitcoin Futures: It is launched by an exchange Chicago Mercantile in the year 2017 and this contract is based on the CME CF Bitcoin Reference Rate.
- Bakkt Bitcoin Futures: It is launched by the Intercontinental Exchange's subsidiary, Bakkt, this contract that actual Bitcoin is exchanged between buyers and sellers.
- CBOE Bitcoin Futures: It is launched by the Chicago Board Options Exchange in 2017.
- Micro Bitcoin Futures: It is recently launched by the CME in the year 2021 and this contract represents 1/10th of a Bitcoin its purpose of design is to offer a more accessible way for individual traders to participate in Bitcoin futures ETF trading.
Advantages and Disadvantages of ETF
Like all other technology, ETH has also come with some advantages and disadvantages, here i listed down various pros and cons of ETF:
Advantages of ETFs:
- Diversification
- Transparency
- Low cost
- Liquidity
Disadvantages of ETFs:
- Volatility
- Trading costs
- Tracking error
- Limited control
Conclusion
A Bitcoin (BTC) futures ETF is the process in which investors can bet on Bitcoin's future price by investing in future contracts such as Micro Bitcoin Futures, CBOE, BAKKT, and CME. Like all other investments, BTC futures ETC could also be risky sometimes as we all know the cryptocurrency world is highly involved due to this reason investors may be at a bear loss sometimes. So it is always best don’t invest more than you can bear the loss in the future and it is always best to start with a low amount.
