Fact check: The myths surrounding Bitcoin ETFs

Dive into the differences between buying Bitcoin in a peer-to-peer transaction on an exchange and investing in Bitcoin ETFs.

Transactions for spot Bitcoin via exchange-traded funds (ETFs) were a distant dream in 2013 when the Winklevoss twins submitted the first application for an ETF tracking the cryptocurrency’s price. 

Over 10 years later, in 2024, the United States Securities and Exchange Commission approved the first batch of spot Bitcoin (BTC) ETF applications from a mix of crypto native and traditional financial institutions. The approvals, however, led to questions about the differences between buying Bitcoin in a peer-to-peer transaction on an exchange and investing in Bitcoin ETFs.

What is the difference between owning Bitcoin ETFs and owning Bitcoin? Like Bitcoin, do ETFs offer profits? All of these questions and more are answered in Cointelegraph’s new video, Legends & Myths about Bitcoin ETFs Debunked, which breaks down the most common misconceptions about Bitcoin ETFs.

Myth: A Bitcoin ETF is the same as owning actual Bitcoin

In terms of ownership, Bitcoin and ETFs are different. When you invest in a Bitcoin ETF, you buy shares in the fund, not the actual Bitcoin itself. This means you’re exposed to the price movements of Bitcoin without owning it directly.

Owning actual Bitcoin involves buying the digital currency directly and storing it in a digital wallet. In this way, you are in control of the private keys and, therefore, your coins.

Fact: A Bitcoin ETF tracks the price of Bitcoin but doesn’t give you ownership of actual Bitcoins.

Myth: Bitcoin ETFs guarantee profit just like Bitcoin

Neither investment offers a guaranteed profit. In fact, investing in a Bitcoin ETF or directly in Bitcoin carries risk, as the price of Bitcoin is highly volatile. 

Remember, the Bitcoin ETF mimics Bitcoin’s price movements, which means its value can fluctuate based on market conditions. Before investing in Bitcoin ETFs or Bitcoin itself, investors should do their own research and consider their risk tolerance.

Fact: Bitcoin ETFs, like all investments, come with risks, and there’s no guarantee of profits.

Myth: Bitcoin ETFs are as volatile as Bitcoin

While Bitcoin ETFs are designed to track the price of Bitcoin, they may not mirror its fluctuations perfectly. 

Bitcoin is known for its high volatility, which can result in substantial price changes within short periods of time. On the other hand, a Bitcoin ETF, being traded on a regulated stock exchange, may experience less volatility thanks to market mechanisms like trading hours and the possibility of incorporating other assets or strategies to mitigate risk.

Fact: While Bitcoin ETFs track the price of Bitcoin, their volatility can be different due to factors like management fees and tracking errors.

Find out more about the misconceptions surrounding Bitcoin ETFs in Cointelegraph’s new YouTube video, Legends & Myths about Bitcoin ETFs Debunked.