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January 11, 2022

What are Crypto ETFs?

What are crypto ETFs?

You always know that things are going more mainstream when the media talks about it. Recently, there has been a lot of talk about those “crypto ETFs”. But what are they?

In simple terms, crypto ETFs make crypto investing possible through a regular stock portfolio. To understand how that works, we first need to understand how ETFs work.

ETF means “exchange traded fund”. ETFs have been around since the seventies. They are financial instruments that are traded just like stock. They have a price, a ticker, and you buy them through your traditional brokerage account.

But instead of representing a direct investment in just one company, ETFs allow you to invest in a portfolio. ETF managers buy and sell several individual stocks, balancing out their portfolio constantly, and you don’t have to worry about trading each of these yourself. Are you familiar with popular funds like Vanguard tracking the SP500 here in the US, or the DAX index in Germany? Those are ETFs.

Bitcoin and crypto ETFs give you the same convenience, but instead of investing in publicly traded companies, the funds invest your money in – you guessed it – crypto.

There are a few reasons why that’s useful: First, it’s much easier to get crypto exposure through your existing portfolio than having to set up a separate crypto exchange account. Second, some ETFs track a portfolio of different crypto, meaning you just have to buy one ETF and they do the work for you. And third, without those ETFs you might not be able to trade crypto directly sometimes, say through a retirement account that only allows you to trade traditional equities.

And now that we have talked about the bridge between the old and the new trading world, next episode we’ll talk about financial innovation that happens entirely in the world of DeFi and what that means.

Disclaimer: This podcast references our opinion and is for information purposes only. It is not intended to be investment advice. Do your own research and seek a duly licensed professional for investment advice.

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