Why Do People Choose Crypto ETFs? What Are the Advantages And Disadvantages?
Now, if you’re not familiar with the crypto markets but want to experience or get the taste of trading digital assets, these ETFs are for you. As someone who had not debuted into these markets, I found ETFs to be the perfect gateway to enter the world of crypto and trade assets. Here’s why:
1.Security of owning digital assets isn’t a concern since I won’t directly own any of those assets, but only the ETF provider will.
2.I don’t have to follow the rigorous process of getting on a crypto market, understanding it from scratch, and then begin trading.
3.Furthermore, it’s better to start with something that I already understand - ETFs, than directly jumping into something completely new.
4.It’s a good bridge between the old and new financial systems that enabled me to transition slowly into the new one.
Here are a few advantages and disadvantages I faced while investing through ETFs.
Advantages Of Crypto ETFs
1.Tax efficiency is perhaps the most important reason for investing via cryptocurrency ETFs. Since cryptocurrencies are unregulated, most pension funds and tax havens across the globe do not allow crypto purchases. This wouldn’t be an issue with ETFs since you or I am merely using trackers and not purchasing the actual digital assets.
2.Convenience is another important reason, especially for the uninitiated. ETFs enable anyone and everyone to experience crypto coin markets without actually having to go through the complete process of crypto exchanges.
3.A single ETF can help you track multiple assets and not just one. It gives you a simple way to invest and manage various digital assets at once and create your portfolios if you wish.
Disadvantages Of Crypto ETFs
1.High management fees are a crucial disadvantage that people might face. Since the ETF providers will be managing everything, their cost is much higher compared to the exchanges.
2.Cryptocurrency trading is either limited or not possible at all. It means if the ETFs are asset-specific, then you can’t hold more than one digital asset. Furthermore, you won’t be able to trade any assets since you don’t hold any but are merely tracking them.
3.Since ETFs will fall under government regulation, you might face privacy issues. Moreover, since Bitcoin or most other digital assets were separate from the central banks, they became a method to beat inflation. This wouldn’t be the case anymore.
Conclusion
ETFs may have their pros and cons, and perhaps in the far future, they will have more cons if mass adoption of cryptocurrencies occurs. However, for now, it’s one of the best ways for an uninitiated user to enter the world of cryptocurrency.
*This article only represents the views of observers and does not constitute any investment advice.
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