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News- For many fintech companies, ETFs are a way to reduce volatility of their portfolios.
- Crypto markets are associated with very high and frequent volatility swings, ETFs allow investors to stabilize their assets.
- Investors can gain exposure to crypto assets as they continue to explore more.
Exchange Traded Funds, in short known as ETFs have grown pretty popular nowadays. ETFs do not only serve the purpose of providing exposure to cryptocurrencies. For many fintech companies, ETFs are a way to reduce volatility of their portfolios. Generally, ETFs facilitate those investors who aren’t ready to put their money on cryptocurrencies directly. However, ETFs aren’t equally perceived by the investors. Some of them think ETFs are safe and profitable while others think of ETFs as no less a scam. For the same reason, ETFs aren’t yet approved by the US regulators, though they have grown exceptionally popular in European countries.
How Do ETFs Differ From Blockchain Stocks?
Zev Fima, research analyst for Jim Cramer’s Charitable Trust explains why she favours ETFs. In a roundtable webinar sponsored by VanEck, Fima said that investors can gain ownership through staking in equities. And if the firms are to benefit from the technology, their position in the market will go up and so will the investor’s position with it. Most often ETFs are compared to individual stocks, however Fima says that Cramer analysts do not bother about most stocks related to blockchain be it, Riot Blockchain (RIOT), Marathon (MARA) and MicroStrategy (MSTR). While these are still speculative to them, they think ETFs differ from them widely.
Knowing the Project That you Invest in is Very Important
According to them, ETFs allow them to invest in crypto as well as stocks like Square (SQ), Nvidia (NVDA), PayPal (PYPL) – Get and Taiwan Semiconductor Manufacturing (TSM). This reduces the volatility as well as provides an embedded call option to the upside. Since, crypto markets are associated with very high and frequent volatility swings, ETFs allow investors to stabilize their assets. Basically, investors new to cryptocurrencies are often attracted by it because ETFs dampen market volatility. Investors can gain exposure to crypto assets as they continue to explore more.
Ed Lopez, Managing Director and Head of ETF Product at VanEck advises all the new investors that they must thoroughly research the cryptocurrency space before they get into it. Knowing the project, knowing what they are investing on and for, often helps in the long run. In addition there should be some allocation to it because of the risk-return characteristics that we’ve seen in some of these cryptocurrencies. More importantly investors must determine their very own approach. The managing director of VanEck is excited for a Bitcoin ETF.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
