Bitcoin explained in 60 seconds - part #2

What is a Bitcoin ETF?

Recently, there has been a lot of talk about a possible ETF to be approved by the SEC.

Many experts say that upon approval of this Bitcoin ETF, a lot of liquidity could flow into the market.

But what is an ETF? And how does a Bitcoin ETF work? Let me explain it in 60 seconds.

-----

The letters ETF stand for Exchange Traded Fund.

An ETF can be bought or sold indefinitely, just like a regular stock. This includes the "Exchange Traded" bit, or "traded on the exchange.

The F of ETF stands for "fund," or mutual fund. Like a mutual fund, a tracker consists of a basket of a (large) number of different stocks or bonds.

A Bitcoin ETF is a type of tracker managed by a fund that constantly tracks and tracks the Bitcoin price. With a Bitcoin ETF, we can distinguish between a "spot" and a "future" ETF.

In a future ETF, the futures of bitcoin are tracked. This involves recording the estimated future value of bitcoin.

In an ETF that tracks futures, futures contracts are purchased in addition. These must be renewed periodically. This is done based on new prices and contracts.

With a spot ETF, the ETF tracks the actual price by purchasing real Bitcoins.