Exchange-traded funds, or ETFs, are investment funds that trade on a stock market with their value derived from an underlying basket of assets such as stocks, bonds, commodities and other financial instruments. They provide investors easier exposure to a certain index of assets.
A Bitcoin ETF is similar, but the underlying asset is the Bitcoin (BTC) cryptocurrency rather than other traditional financial instruments.
The hope of Bitcoin ETFs is that they could provide institutional investors an easier way to buy into Bitcoin and crypto markets, thus making it more attractive to the broader investment community.
While there have been many proposals for Bitcoin ETFs presented to the United States Securities and Exchange Commission, or SEC, the main hindrance to their approval is concern for asset volatility and market maturity, though this sentiment is starting to shift in crypto’s favor. For years, and most certainly now, there has been demand from institutional investors for this on-ramp to the crypto economy.