If you’ve been researching cryptocurrency trading options, you’ve probably heard the terms “bitcoin spot” and “futures ETFs” before. But what exactly do these terms mean and what are the differences between the two? In this article, we’ll discuss the definitions and key distinctions between bitcoin spot and futures ETFs.
What is Bitcoin Spot?
Bitcoin spot (or spot bitcoin) refers to the buying and selling of the physical cryptocurrency “bitcoin.” When you buy bitcoin spot, you are actually purchasing the physical coin to own and store as you would with a physical commodity. On the other hand, when you sell bitcoin spot, you are actually exchanging it for fiat currency (or other digital assets).
What is a Futures ETF?
A futures ETF (or Exchange Traded Fund) is a type of financial product that tracks the movement of a particular asset. In the case of cryptocurrency, a futures ETF allows you to invest in the underlying asset – in this case, bitcoin – without actually purchasing the asset itself.
Difference between Bitcoin Spot and Futures ETFs
The main difference between bitcoin spot and futures ETFs is that with the former, you actually own the physical cryptocurrency whereas with the latter, you are simply investing in the asset without actually owning it. Also, when you invest in a futures ETF, you can gain exposure to a wide range of cryptocurrencies, rather than just one.
Another key difference between bitcoin spot and futures ETFs is the fact that when investing in a futures ETF, your capital is more secure and the risk is far lower (compared to buying and selling physical bitcoin). This is because a futures ETF acts like a buffer, absorbing any losses on your behalf and protecting your capital from any sharp fluctuations in the cryptocurrency market.
By understanding the key distinctions between these two types of cryptocurrency investments, you can make better informed trading decisions and reap the greatest rewards. It’s important to remember to always assess the risks carefully before investing and make sure to diversify your portfolio accordingly.