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Should You Invest in Real Bitcoin or Bitcoin ETFs?

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By , Updated On February 06, 2023

Bitcoin ETFs first emerged in 2021, and the ETF started trading in October 2021, two decades after the launch of Bitcoin. These Bitcoin ETFs are available on traditional exchanges, unlike Bitcoin, which you can only access through crypto exchanges like BitIQ. With Bitcoin, you need to understand much about the technology, the blockchain, and mining, whereas you don’t have to understand much about Bitcoin when investing through ETFs. When introducing Bitcoin ETFs, the intention was to make it possible for investors to invest in cryptocurrencies without actually owning them. Bitcoin ETFs track the value of Bitcoin, allowing you, as an investor, to trade without the trouble of going to a crypto exchange.

Although Bitcoin ETFs may come out as the better option, for some people, Bitcoin could be a better choice for them because it has existed for a long time. Trading has become easier with time with trading platforms, which are straightforward. 


How Bitcoin Works

Bitcoin was launched in 2009 when Satoshi Nakamoto released the white papers on blockchain technology. Bitcoin depends on blockchain technology, which has more significant potential than has been explored. Blockchain is an open-source code that shares a public history of transactions that no entity can manipulate. The role of blockchain is to ensure that you cannot spend your Bitcoin twice. People verify the transactions through mining, which validates every transaction on the blockchain by working a series of mathematical computations.

Understanding Bitcoin technology and how it works can be a complex process that could be hard for any layperson. Before investing in Bitcoin, more so through mining, you need to understand these terms, what they mean and how generally the process works. You will require a Bitcoin wallet where you store your public and private keys. All exchanges take place on a Bitcoin exchange. As a miner, you make money by validating blockchain transactions and getting paid through Bitcoins.


How Bitcoin ETF works

People trade Bitcoin ETFs on traditional exchanges, which can track the value of Bitcoins. Currently, you can find ETFs for various assets and industries like currency and goods. Bitcoin ETFs work the same way as other ETFs; whenever the price goes up or down, so does the price of Bitcoin. Unlike the usual crypto exchanges, the difference is that you trade on a market exchange.

With ETFs, you don’t have to learn how bitcoin works, sign up on crypto exchanges, or take any direct risks. It is more straightforward. When you lose your Bitcoin wallet, you lose your Bitcoins, but ETFs simplify this process. A single ETF can comprise more than just Bitcoin as it could merge with other currencies or commodities such as apple and Facebook stocks. Due to Bitcoin’s unregulated and decentralized nature, many pension and tax bodies don’t allow its trade. But as an EFT, it is often regulated and on a traditional exchange which improves its eligibility.


Take Away

Whether to invest in Bitcoin or Bitcoin ETF is solely a personal decision, considering how well you understand how both of them work. Bitcoin ETF comes out as the easier option, but that decision you want to make. If you know how Bitcoin technology works, you can trade with it. However, Bitcoin ETF might be the better option when you want something regulated and acceptable by pension and tax bodies. At times trading Bitcoin could be very limiting, considering that there are certain places where Bitcoin is not permitted. However, when it comes in the form of ETF, it makes it more acceptable. Before deciding on which to settle on, do more digging, find out how each works, and settle for the one that works best for you.