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Bitcoin Spot ETF vs Invest Bitcoin

What is a Spot Bitcoin ETF?


A spot Bitcoin ETF is an exchange-listed investment fund that allows people to invest indirectly in Bitcoin without actually purchasing the cryptocurrency. They operate similarly to gold ETFs, allowing people to invest in gold without having to purchase and store the gold bars themselves.


Bitcoin ETFs are issued and managed by fund companies and listed on traditional stock exchanges. Like traditional ETFs, fund companies will invest funds in Bitcoin according to the investment objectives and strategies of spot Bitcoin ETFs, providing investors with investment returns that closely match the Bitcoin index (before fees and expenses are deducted).

 

Comparison: Spot Bitcoin ETF vs. Bitcoin?

(1) Secure transactions: Regulated spot Bitcoin ETFs listed on the Hong Kong Stock Exchange offer reduced risks of hacking and fraud due to the involvement of professional fund managers and reputable custodians. This eliminates the need for investors to protect private keys and manage wallets.

(2) Simple and convenient transactions: Spot ETFs can be bought and held through traditional stock accounts, similar to stocks, without requiring a dedicated cryptocurrency trading account.

(3) Low investment threshold: ETFs generally have a lower investment threshold, often starting at $100.

(4) Dual liquidity: Bitcoin, being the largest cryptocurrency in the world, serves as highly liquid underlying assets. The listing of spot ETFs on traditional exchanges further enhances liquidity.

(5) Regulated and legal assets: Bitcoin ETFs are legal investment products approved by Hong Kong regulators, with a reduced level of trading associated regulatory risks[2].[2] Authorization of a fund product by the SFC does not imply a recommendation or endorsement by the SFC of Hong Kong, nor does it guarantee the commercial merits or performance of the fund product.

 

Comparison: Spot Bitcoin ETF vs. Futures Bitcoin ETF

Futures cryptocurrency contracts are a more complex investment tool that requires a higher level of professional knowledge from investors. The performance of a futures cryptocurrency ETF may not precisely reflect that of a spot cryptocurrency due to certain tracking errors.

On the other hand, spot ETFs are more straightforward and easier to understand. They closely track the performance of cryptocurrencies such as Bitcoin and Ethereum, making them accessible to a wider group of investors. The advantages of spot ETFs include:

(1) Direct tracking of Bitcoin: Spot Bitcoin ETFs directly track the price of Bitcoin, rather than through futures contracts. They allow investors to gain more direct exposure to the price movements of these assets, without concerns about the potential risks associated with futures contracts.

(2) Exemption from expensive rolling costs: Futures ETFs typically incur higher transaction costs due to the management of futures contracts. In contrast, Spot ETFs have a simpler fee structure, often involving only management fees. This makes holding a spot ETF for the long term generally more cost-effective.

(3) Lower tracking error: Futures crypto ETFs require regular rollovers, which can lead to rollover costs, especially in situations where the futures price exceeds the spot price (known as contango).

 

Hong Kong Spot Cryptocurrency ETF vs. US Spot Cryptocurrency ETF

(1) Time zone: Compared with the United States, local investors in Hong Kong can avoid the inconvenience and risks that may arise from cross-time zone trading.

(2) Innovative subscription and redemption arrangement, allowing both in-cash and in-kind transactions: Surpassing the United States, Hong Kong has introduced an innovative subscription and redemption mechanism that allows investors to choose between subscribing and redeeming ETFs in cash or in kind (physical cryptocurrency).

(3) Tax incentives: Hong Kong residents can enjoy tax benefits when purchasing spot Bitcoin ETFs in Hong Kong, sparing them relevant taxes. In contrast, investing in a U.S. spot Bitcoin ETF may involve additional taxes.

(4) Available to Hong Kong retail investors: Hong Kong investors can purchase Hong Kong’s spot Bitcoin ETFs mainly by completing a cryptocurrency knowledge test, in addition to meeting basic Know Your Customer (KYC) requirements. In contrast, Hong Kong investors purchasing the corresponding ETF in the United States must be professional investors who meet high investment threshold restrictions.

Disclaimer

Please read the following information carefully before proceeding.

 

The information contained in this website has been prepared to assist potential investors in making an informed decision in relation to investing in the ETFs / products under PANDO. A product key facts statement and prospectus for the ETFs / products under the ETFs which contain the key features and risks are also issued by the manager and available in this website.

 

The contents of this website have been prepared in good faith. However, the prices quoted are for reference only and may be subject to change without prior notice. Past performance is not a reliable indicator of future performance. The value of ETFs / products can fluctuate substantially within a short period of time. The management company or the directors of the scheme (in the case of a mutual fund corporation) accept full responsibility for the accuracy of the information contained in the offering document and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement misleading.

 

An investment in any ETFs / products carries various risks. Each of these may affect the net asset value, yield, total return and trading price of the units. There can be no assurance that the investment objectives of ETFs will be achieved. You should carefully evaluate the merits and risks of an investment in the relevant ETFs / products in the context of your overall financial circumstances, knowledge and experience as an investor. The offering document should be read for further details including the risk factors.

 

ETF / product under the OFC are authorized by the Securities & Futures Commission in Hong Kong (the “SFC”) under Section 104 of the Securities and Futures Ordinance. However, the SFC takes no responsibility for the financial soundness of the ETFs / products under the Trusts or for the correctness of any statements made in this website. SFC authorization is not a recommendation or endorsement of a scheme nor does it guarantee the commercial merits of a scheme or its performance. It does not mean the scheme is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors.

 

You should consult your financial adviser, consult your tax advisers and take legal advice as appropriate as to whether any governmental or other consents are required, or other formalities need to be observed, to enable you to acquire units as to whether any taxation effects, foreign exchange restrictions or exchange control requirements are applicable and to determine whether any investment in the ETFs / products is appropriate for you.

 

The website has not been reviewed by the Commission.

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