A Brief Guide To Bitcoin ETFs In India

Estimated read time 6 min read

“We have conflicting feelings about them, yet we can’t ignore them.” That sum’s up our relationship with cryptocurrencies and the king of all those cryptocurrencies, Bitcoins.

According to a recent poll by KuCoin, one of the world’s biggest cryptocurrency exchanges, over 115 million Indians, or 15 percent of the Indian population aged 18 to 60, now possess or have exchanged bitcoin in the previous six months.

At this time, the total value of all crypto assets on the planet is around $1.20 trillion. A significant portion of this crypto boom happened last year as people sought ways to diversify their holdings. The strengthening of government rules on cryptocurrencies, particularly, is boosting daily confidence in it.

But suppose you’re just getting started with cryptocurrencies and are worried about losing your money. In that case, it’s understandable to want to play it safe. The Top 10 stock brokers in India suggest you go the Bitcoin ETFs route.

In a nutshell, what is crypto?

Cryptocurrencies are also known as crypto. Crypto is ungoverned digital money that is a medium of exchange via a decentralized computer network, and Cryptos use encryption for secure, mutually authenticated transactions.

It’s important to emphasize that no controlling organization is issuing these digital currencies, unlike fiat money. As a result, cryptocurrencies could be resistant to governmental regulation. A broad range of activities, including trading, and transactions, may be done using cryptocurrencies.

What is Bitcoin?

An unidentified creator or group of developers going by the moniker Satoshi Nakamoto released Bitcoin to the world in 2009. Bitcoin (BTC) was the first cryptocurrency, created in 2009.

Since then, Bitcoin has emerged as the currency with the most global recognition, and its success spawned several other cryptocurrencies. These rivals either want to displace it as a means of exchange or useit as utility or security tokens in other blockchains and cutting-edge financial systems.

What is Bitcoin ETF?

Like your mutual fund, Bitcoin ETFs are pools of bitcoin-related assets provided by brokerages on regular exchanges.

Despite their extreme volatility, cryptocurrencies might potentially provide enormous gains. Bitcoin ETFs are a way to invest in Bitcoin without actively managing it since the investor sits back and waits for the asset’s value to rise over time. They often maximize their potential by spreading out their expenditures, especially during times of high volatility.

Exchange-traded funds (ETFs) let people not sure about investing in cryptocurrency get some exposure to the asset class. You can accomplish this without ever purchasing any cryptocurrency.

With the creation of Bitcoin ETFs in October 2021, many traders didn’t want to deal with the security concerns associated with cold or hot wallets.

Benefits Of Bitcoin ETF

  1. Convenience

Investing in a Bitcoin ETF gives leverage to the price of Bitcoin without learning how Bitcoin works, signing up for a cryptocurrency exchange, or holding Bitcoin directly.

  1. Secure

An electronic wallet stores bitcoins. So if the password is lost, they are lost.

  1. Diversification

ETFs hold many assets. A Bitcoin ETF may include Bitcoin, Apple, Facebook, and more, allowing investors to limit risk and diversify their holdings. A Bitcoin ETF would diversify investors’ equity portfolios by trading on a regulated exchange.

  1. Tax efficiency

Most tax havens and pension funds don’t accept Bitcoin purchases since it’s uncontrolled and decentralized. On established exchanges, a Bitcoin ETF would presumably be SEC-regulated and tax-efficient.

Disadvantages of Bitcoin ETFs

  1. Management fees

ETFs impose management fees for convenience. Owning a lot of Bitcoin ETF shares might lead to high management costs.

  1. Inaccuracy

ETFs monitor an underlying asset’s price and may have numerous holdings to diversify. Due to its other assets, a 50% spike in Bitcoin’s price may not show in the ETF’s value. Therefore, ETFs add leverage to Bitcoin’s worth, but they may not be reliable trackers.

  1. Limits

For Bitcoin, you can trade many cryptocurrencies. Including Ethereum, Litecoin, XRP, and many others. A Bitcoin ETF is not a cryptocurrency; it’s an investment vehicle that follows Bitcoin’s price. Hence, a Bitcoin ETF would not be eligible to trade for other cryptos.

  1. Ownership

Bitcoin protects governments, fiat money, and stocks. Bitcoin’s independence from central banks reduces financial risks, and Bitcoin’s Blockchain protects users’ and investors’ privacy. A government-regulated Bitcoin ETF would remove these advantages.

How to buy the BTC ETF from India

  1. Review several online brokers

To start, you must register with an ETF broker platform that offers access to BTC stock markets.

  1. Fund your brokerage account

Fill out an application with your financial and personal information, including your ID and Aadhaar number. Use a bank transfer, credit card, or debit card to top up your account.

  1. Look up the Bitcoin ETF

Start by searching for the desired BTC ETF by name. Look into its past to ensure it’s a wise investment for your financial objectives.

  1. Buy now or later

Use a market order to buy now or a limit order to postpone your purchase until the Bitcoin ETF hits your chosen price. Look into dollar-cost averaging, which smooths out purchases at regular times and quantities, to spread out your risk.

  1. Choose how many to purchase

Compare your budget with a diversified portfolio that can reduce risk during market ups and downs at today’s pricing.

  1. Review your investment.

Thank you for investing in the Bitcoin ETF. Track the performance of your ETF to optimize your portfolio while keeping a long-term perspective.

The Final Word

It’s important to remember that cryptocurrencies are a risky kind of investing, and they cannot be used as a replacement for gold since they have no value as a form of storage. As a result, supporting more than 4-5% of one’s whole financial portfolio in cryptocurrencies is not recommended.

Businesses do not back cryptocurrencies, so a financial analysis of a company or organization cannot be used to determine their value. Furthermore, it is impossible to value it like a currency since a currency like a rupee or a dollar is based solely on supply and demand from a country’s economy.

With only one tweet, an “influencer” like Elon Musk may shift the price of Bitcoin by a few percentage points. It is the same as gambling. Consequently, it is difficult to advise which cryptocurrency to invest in; your guess is as good as mine.

If one plays within their risk tolerance, cryptocurrency may add value to their portfolio of investments. Consequently, in this case, investing in this asset class via cryptocurrency ETFs may be a cheap and less risky option.

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