Exchange-traded Funds (ETFs) are a popular phenomenon in the world of Cryptocurrency majorly as it serves as a means of investing in Cryptocurrency without having to fear high transaction costs and the additional expenses that come with ownership.
Cryptocurrency ETFs are funds that are made up of digital currencies. These funds, in turn, are traded on exchanges daily. Majorly, ETFs track specific prices of digital assets while being traded on exchanges.
ETFs are quite similar to mutual funds, except that while mutual funds do not give room for the continuous trading of shares by investors on trading days, ETFs do.
Investors always seek to diversify their portfolio(s). They do this by accessing tokens/assets or a group of assets. It is at this point that Exchange-traded funds come in.
This article sheds light on everything you need to know about ETFs, ranging from What ETFs are, how ETFs work, and how to invest in them to their benefits and profitable Cryptocurrency ETFs to consider.
What is ETF?
ETF is an acronym for Exchange-traded Funds (ETFs), which are funds that track the price of a single digital token or a group of different digital tokens. These ETFs are mainly made up of digital currencies traded daily on exchanges.
Many investors seek to be involved in cryptocurrency transactions without directly managing digital assets. As a result of this, ETFs exist (even though they exist majorly to track the indexes of tokens).
Given that investors don’t want direct involvement with digital assets, Exchange-traded funds help with the needed tracking of the prices of these assets and tokens.
A fund cannot be considered an Exchange-traded fund if it cannot be used to invest in business applications with the help of blockchain technologies. And also when it cannot be used to invest in Cryptocurrency Investment products made available by digital assets managers.
Just like its name suggests, an ETF can be traded daily on exchanges and, at the same time, purchased and sold using a brokerage account, just like a stock is sold.
Depending on how they are sold or purchased by investors, the prices of ETFs fluctuate daily, mostly because they are traded daily.
Exchange-traded Funds are a means of investing in Cryptocurrency and gaining the needed exposure without being involved in the direct purchase or selling of digital tokens.
How ETFs Work.
In Cryptocurrency, ETFs occur in two kinds:
- ETFs that are backed up by physical Cryptocurrency assets.
Ownership of tokens in this kind of ETF is in the form of shares, and investors are allowed to buy these shares. When buying these shares, Investors indirectly become owners of digital assets without additional expenses resulting from ownership.
- ETFs are backed up by synthetic variants that track Exchange-traded Products (ETPs), futures contracts, and other forms of Cryptocurrency derivatives.
These forms of ETFs go by the index movement of derivatives as against the price movement of cryptocurrencies. This goes on to say that the prices of shares in this form of ETF increase just as the prices of Futures Contact and ETPs increase. And just as the prices of these derivatives decrease, the prices of shares decrease correspondingly.
Unlike the other form of ETF, ETFs backed up by synthetic variants are open to risks stemming from non-transparent operations.
Benefits of ETFs.
The following are advantages of owning ETFs:
- Owning ETFs saves most crypto investors from having added expenses from being direct owners of digital assets. It also saves them from inflated transaction fees.
- Owning ETFs makes the crypto investment worthwhile to new investors.
- ETFs allow the investment in volatile assets without having a fear of risks.
- ETFs allow investors to diversify their portfolios without paying for single tokens.
How to Invest in ETFs
The following are steps to take in investing in ETFs:
- First, open a brokerage account and go through the necessary onboarding process.
- Invest a certain percentage of your total investment budget into ETFs.
- Fund your brokerage account and do the necessary research on which ETFs you’d like to invest in.
- Make a market order for ETFs you’d love to purchase while considering your current budget. Your budget determines the maximum number of shares you’d be able to purchase.
Although, investing in ETFs could seem complicated, especially because of the management fees investing in ETFs.
Digital Assets to Consider Investing in.
Given their exclusive feature, utility, and price, the following are tokens worth investing in:
Being the native token of the Tamaverse (the Tamadoge ecosystem), TAMA boasts of being not just the most hyped and top trending meme coin in the Cryptocurrency market owing to its unique tokenomics (termed TAMAnomics in the Tamaverse) and importance as a digital asset.
TAMA tokens are currently worth $0.07 and are expected to be worth the least $0.59 over the decade. Being a utility meme coin, Tamadoge allows users to create, breed, and care for their NFT pets within the ecosystem. When the Tamadoge NFT pets are old enough, they can battle in the arena, and winners are rewarded with NFTs and TAMA tokens.
2. Lucky Block (LBLOCK)
Lucky Block is a global NFT competition platform with a native token named LBLOCK. LBLOCK is the leading deflationary token in the Crypto lottery market, given that it only burns 1% of its initial supply of tokens.
An LBLOCK token is currently worth $0.000365 and is projected to be worth the least $0.00589 over the next two years.
Lucky Block sees every investor participating in the NFT competition as a winner. And every investor that participates in the competition can win gifts ranging from Lamborghini to Bitcoins, houses, expense-paid holidays, and NFTs. In addition, price draws on the Lucky Block platform are paid in LBLOCK.
3. Battle Infinity (IBAT)
The Battle Infinity platform merges sports into its metaverse by employing P2E and NFT elements. IBAT is one of Battle Infinity’s top tokens, with over 40% of it in circulation.
An IBAT token is currently worth $0.0033329 and is projected to be worth more over the years.
Given its unique features, its meta verse arena, fantasy leagues, and its staking platform are part, Crypto analysts have predicted that the IBAT token will remain bullish until its decade is over.
ETFs are a form of investment funds that could be traded the same way stocks are traded. These investment funds, however, help to track the prices of single tokens or a group of digital assets. And they are particularly useful to Crypto investors as they help them get involved in Crypto investment without having to manage the assets they’re investing in directly.
In addition, ETFs offer low costs of ownership of assets and time-intensive functionalities in choosing cryptocurrency tokens. Cryptocurrency investors are not the only set of crypto users who enjoy the existence of ETFs. For Crypto enthusiasts, ETFs boost liquidity and allow them to adopt cryptocurrencies and digital assets for investment.
Crypto investors and enthusiasts who might not invest in ETFs could also invest in digital assets with great utilities, such as the LBLOCK, Battle Infinity, and TAMA tokens.