Cryptocurrency exchange traded funds could be on the way as hard line financial watchdogs warm to a more mainstream approach to digital currencies.
Exchange traded funds (ETFs) tend to track an underlying index, like the value of Bitcoin or other cryptocurrencies.
Investors buy and sell shares in ETF funds listed on stock exchanges rather than taking a stake in a cryptocurrency.
The news of the change of attitude by regulators at the US Securities and Exchange Commission (SEC) comes as Bitcoin and other cryptocurrencies soar in value in the wake of Joe Biden’s presidential election outcome and disclosure of a possible COVID-19 vaccine.
How ETFs Work
An ETF is a traded security that has a bid/offer spread on a stock exchange, just like a share.
The price can fluctuate all day as traders buy and sell their holdings.
Thousands of ETFs are on world stock markets. The security can include stocks, commodities or bonds linked to a single market or as international securities.
A popular ETF is the SPDR S&P500 ETF which tracks the US Standard & Poor’s 500 Index of large public companies. ETF investors own shares in the fund rather than shares in the companies that make up the S&P500.
The ETF tracks the performance of the index and the price rises and falls in line with how the index moves.
Because ETFs are continually traded, investors find stakes in the fund are easy to buy and sell.
ETFs in the States are regulated by the SEC
An ETF also tends to be a cheap way to invest