• July 24, 2024

Regular ETFs vs Crypto ETF

The cryptocurrency world is rapidly expanding, with a whole new world of possibilities arising. There are now thousands of different cryptocurrencies and many ways to invest in them. One way that’s recently gained a lot of attention is investing in a cryptocurrency exchange-traded fund (ETF).

Differences between typical ETFs and crypto ETFs

Before we can understand what a cryptocurrency ETF is or how they work, it’s essential to have some background information on traditional ETFs and the differences between typical ETFs and crypto ETFs.


It will help us better understand the pros and cons behind each type and which might be best for us depending on our investment purposes. Once you’ve read this article, you’ll hopefully have all the knowledge you need to decide whether an ETF is right for you!

ETFs are regular investment that is publicly traded

In their simplest form, traditional ETFs are just regular investment that is publicly traded. That means that you can buy into the value of the ETF instead of buying into the individual companies that make up the ETF.


It means you have to deal with one single company when investing rather than many different ones, which makes it much easier for beginners who don’t know anything about cryptocurrency or investing in general yet. You can find more detail on what ETFs are and how they work here.


It’s important to note that there aren’t any actual cryptocurrencies available in the regular stock market; if you wanted to invest in Bitcoin, Ethereum or Litecoin, then an ETF would be your best option (at this point).


The most significant difference between a regular ETF and a crypto ETF is that a cryptocurrency ETF holds digital currency rather than traditional stock. If you wanted to invest in a crypto ETF, your options would be pretty limited as currently, no companies offer them on the market yet.

How do Crypto ETFs work?

Crypto ETFs work just like any other regular ETF where you’re buying into the value of an underlying asset, but with cryptocurrencies instead of traditional stocks or bonds. The aim of these types of funds isn’t to mimic the price movements of the underlying cryptos; instead, they try to offer steady long term growth by investing in different cryptos using various strategies (more on that later).



It’s important to note that many people are still unsure whether someone can create “Wall Street grade” cryptocurrencies with all the characteristics required for ETFs to exist, such as being regulated. There are a lot of different projects currently working on this problem, and many people think it’s possible within the next few years.

Benefits and drawbacks to crypto ETFs

There are both benefits and drawbacks to crypto ETFs compared to regular stocks. One significant benefit is that there are no upfront fees or commissions; the exchange will charge any commission or fee only after the sale is complete. It means that prices stay low for investors meaning they can make more money in the long run.


On top of this, they offer excellent liquidity as well as being able to buy fractional shares, meaning that even if the value of the ETF is too high for you, you can always purchase a small piece.

Risks associated with crypto ETFs

However, there are also many different risks associated with crypto ETFs. One significant risk is that your money could suddenly disappear overnight if the exchange shuts down or gets hacked because the government does not regulate them.


It’s unlikely but still possible, which makes investing in them incredibly risky compared to regular currencies or stocks where this isn’t possible – although it’s still much safer than investing in individual cryptos directly!

Daily fluctuations in value

Another risk comes from how volatile cryptocurrencies are; daily fluctuations in value are very common, and sometimes huge drops or rises in price can happen in a concise amount of time. It’s great for making money fast, but it also means that the value of your ETF could take a big hit without warning.


If you’re not experienced with investing, this type of risk might be too much to deal with, making traditional ETFs more suitable for you.


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