Major money managers and institutions have applied for filing for Spot Bitcoin ETFs with the SEC, which indicates that a new type of financial instrument may enter the crypto space. In simple terms, this would mean that large investors will be able to purchase cryptocurrency through an Exchange Traded Fund (ETF), which allows them to hold and trade it without actually owning it.
This could have huge implications for crypto traders as it may open up access to the cryptocurrency markets for a larger pool of investors, potentially leading to increased liquidity and more competitive trading opportunities. Let’s explore how to prepare for a Spot ETF and what impact it could have on the crypto markets.
Step #1 – Understanding The Financial Product
The first step for traders is to understand how a Spot ETF works. In essence, it is a fund that holds cryptocurrencies as its underlying asset and can be traded on stock exchanges just like other securities. This allows investors to gain exposure without needing to purchase cryptocurrency directly or even understand how the blockchain works.
The downside is that those that own the ETF won’t actually own the underlying asset and may not have full control of their investment. This could mean that investors will need to pay additional fees to access their funds or face other restrictions. The benefit is that more money overall will enter the crypto space, potentially leading to the increased value of cryptocurrencies
Step #2 – Preparing Your Trading Strategy
Now that you understand Spot ETFs and what they could mean for the crypto markets, it is time to start thinking about how to adjust your trading strategy. Exchange Traded Funds (ETFs) are great for traders looking for long-term investments. Because ETFs trade like stocks, traders can buy and sell them quickly and easily using traditional platforms. If you are a trader and anticipate that more funds will enter the crypto market as a result of Spot ETFs, it may be wise to start researching and constructing a trading strategy that can benefit from this increased liquidity.
It may also be beneficial to start researching the underlying assets of Spot ETFs and the different options being proposed by major financial institutions. By knowing which players in the space are pushing for Spot ETFs to become a reality, traders can better position themselves to take advantage of any trading opportunities that may arise.
Step #3 – Monitor Crypto In Real-Time
A large inflow of new potential investors may be a catalyst for market volatility. To ensure that you can capitalize on any potential price movements, it is important to have an up-to-date understanding of the crypto market. This means having access to a free crypto portfolio tracker such as Moonrig.io. The markets may move fast as a result of this news and if the filing goes through, investors may have to act quickly. Having access to instant crypto notifications through software that doesn’t require your private keys can be a great way to stay informed!
