How you can profit without having any knowledge of cryptocurrency and without owning a single one.
Imagine an investment where you make a single purchase and then have the potential to earn profits from several different cryptocurrencies regardless of how a particular one is performing. How could you do this? With a cryptocurrency ETF. Lately there has been lots of talk of a Bitcoin ETF or an Etherium ETF. But the idea of a Bitcoin ETF really goes against the reasons why ETFs are created. I posted a recent article “Does Bitcoin need and ETF” where I stated Use Cases for ETFs and whether they applied to Bitcoin. Basically, they did not, but an ETF could still be used in cryptocurrencies with some great rewards.
In my previous article, I stated that ETFs are used to either make profits on an asset that may be too expensive to physically own, like Gold, Crude Oil or Natural Gas; or because you want to invest in several assets without the hassles of owning them all and rebalancing as needed. For example, the (DIA) ETF invests in the stocks of the Dow Jones Industrial Average. You can purchase shares of the ETF without having to purchase stocks from all those companies. In addition, you do not have to manage those stocks and/or rebalance them. The ETF does the work for you. It’s a win-win for the investor and the owners of the ETF.
So why can’t ETFs be applied to cryptocurrencies. The answer is they can, just not in the way the recent ETF proposal have been trying. The recent ETF attempts in Bitcoin are focused solely on a single cryptocurrency, Bitcoin. The only reason to have an ETF for a single asset is because investors find it too costly to directly own that asset, like Crude Oil or Natural Gas. Could you imagine a tanker truck pulling up to your front door and asking where he can off-load? Owning Bitcoin is essentially cost free. It can be stored for several years without incurring any additional costs. So why would you want to use an ETF?
For a single cryptocurrency an ETF is not feasible, but if a General Cryptocurrency ETF was proposed, that’s a different story entirely. A General Cryptocurrency ETF could purchase several cryptocurrencies and rebalance them as needed! This would allow investors of the ETF and the owners, to profit regardless of how a single cryptocurrency is performing. They could simply rebalance the amount of each cryptocurrency in the ETF to maximize returns, even when some are in a downturn.
Would you invest in an ETF that owns several cryptocurrencies such as Bitcoin, Etherium, Dash, Monero and perhaps Litecoin or Ripple? What if the ETF had a few speculative currencies in the mix? Imagine getting in a before the boom. But how would know which currency is going to rise next? You won’t need to. The ETF managers will do the research for you. They will balance the ETF with known safe assets, like Bitcoin or Etherium and mix in other medium risk currencies like Dash or Monero. A good manager will most likly have a couple stable investments like Litecoin or Ripple and even a few low risk/high return possibilities like Decred or Vericoin.
Currently today, there are no general ETF proposals in cryptocurrencies that I am aware of, but could you imagine the potential if there was? Cryptocurrencies have been proven to rise and produce great returns, but knowing which ones to buy and which ones to sell can be daunting. Wouldn’t you want the capability of owning several cryptocurrencies without the trouble of buying and selling each day? The possibilities of this type ETF could produce outstanding returns and open the cryptocurrency markets to Billions if not Trillion of dollars of investment potential. Just the act of creating this type of ETF could do wonders for the entire cryptocurrency market.
Loki Sullivan
Bitcoin Philosopher
