ETF: What is it and what are the advantages of this investment

Do you know what an ETF is? These index funds can be an alternative to diversify your investments. See here and discover the advantages.

An Exchange-Traded Fund (ETF), also known as an index fund, is an interesting way to invest in the stock market without the need to expose yourself to the many risks of traditional stock exchanges. The ETF emerges as a great option for beginner investors and Bitcoin itself has a very interesting history with this type of investment.

All administration of this investment is carried out by a specialized manager (or managers) with daily monitoring of the market and the appreciation of the shares. This manager performs the necessary trades to guarantee that the investment has a satisfactory result, always having the stock market index as a guide margin.

This management is done by different companies and professionals in the national and international market and they charge an administrative fee to manage these investments. But it is worth noting that the daily valuation already takes this rate into account, ensuring consistency in profit for customers.

What are the benefits of ETF?

The ETF is slowly becoming a very attractive option precisely for those who are starting to invest in the stock market. This is because it brings a number of benefits to beginner (and veteran) investors.

  • Diversification – One of the most interesting benefits of an ETF is diversification without the need to buy multiple assets directly. As an index fund is based on several stocks traded in the market, an ETF share is already diversified. This lowers your investment risks and increases the chance of profits.
  • Passive growth – Although there are ETF funds with active management, one of their main attractions is precisely their passive management. The investor in this case does not need to worry about buying and selling different stocks, he just needs to buy the desired shares and the person responsible for the ETF will try to maintain the profit margin according to the indices.
  • Liquidity – Liquidity is a very important factor in the traditional market and also in the crypto market . As ETFs are traded on the exchange every day and are of general interest, it is easy to buy and sell shares at any time.
  • Accessibility – Betting on the ETF is one of the main gateways for most investors, as it offers an easy solution for buying shares. Depending, you can start with a low initial investment, from R$ 50.

What is your use?

The usefulness of an ETF lies precisely in how it offers more security through diversification, without making the investment process complicated. As diversification is the main strategy to avoid financial losses, this guarantees a great advantage over other types of income, without jeopardizing profit possibilities.

The ease of starting like this is also a key utility. This mainly helps those who want to invest, but do not have the necessary strategic knowledge to do it actively in the traditional market.

These are fundamental activities for many investors, which is precisely why in recent years there have been several attempts to create a Bitcoin ETF.

ETF and Bitcoin

As you can understand, an ETF is healthy for the financial market, bringing great benefits to a portion of investors. So why not apply this to the crypto market? This is exactly what many companies and entities have been trying to do since 2016, but which have always ended up bumping into regulation and approval by the US Securities and Exchange Commission (SEC).

The first attempt to create a Bitcoin ETF was just before the great boom of 2017. The proposal was created by the Bats BZX Exchange, with the intention of listing and trading shares of the Winklevoss Bitcoin Trust. The proposal was rejected by the SEC in 2017, which justified that the Bitcoin market was unregulated, very volatile and allowed manipulation.

These attempts continued into 2018, when they gained support from one of the SEC commissioners, Hester Peierce, who is now known as “Bitcoin Mom”. All proposals brought arguments about how the market has matured, become much more resilient to manipulations and is even more regulated in different parts of the world.

The attempt to create an ETF for the largest cryptocurrency in the world could be the guarantee of greater acceptance by the public and by institutions and was considered by many to be a catalyst for a new price peak for the crypto asset.

Now that the ETF has been approved, what changes in the Bitcoin world?

With the approval of the Bitcoin ETF we have a considerable change in the crypto market: in the regulatory scope, we are sure that Bitcoin is being taken much more seriously than before. This is an important step forward for the overall regulatory security of Bitcoin, and is one of the foundations for greater institutional adoption in the future.

But what about the price? This is certainly the biggest question regarding how a Bitcoin ETF can change the crypto market. Many experts and investors see this moment as an important catalyst for a new rally.

With the ease and security that an ETF can bring to the Bitcoin market at different levels, in theory this will bring a wave of new investors to the asset. As the price of BTC is determined by the law of supply and demand, with an increase in demand, the price will increase considerably. Therefore, the recent approval of the Bitcoin ETF is great news and could indeed mean a new cycle with an uptrend to a new all-time high .