As you may be aware, there are many ways you can participate in cryptocurrency trading today. Fund managers create portfolios investing solely on cryptocurrencies or assemble them out of existing cryptocurrencies for clients.
The Australian Securities Exchange (ASX) has introduced an exciting product called DMS.Au, allowing investors to invest in bitcoin without owning any coins themselves. Instead, they can purchase shares that represent ownership of one bitcoin worth of market value; the price is set at $1875/BTC by considering the actual price and the volume of shares traded.
Crypto ETFs like DMS.Au provide many benefits for investors who don’t necessarily possess the expertise to buy bitcoin, keep them safe and find a secure location; they can use external custodians. This sort of crypto ETF also covers lost or stolen coins.
If you were to hold actual bitcoins, it’s your responsibility to ensure their security goes without saying that cryptocurrencies exchanges have been hacked in the recent past, with the most prominent examples being the infamous MtGox exchange hack and Bitfinex hack. DMS.Au is listed on ASX and was designed and created by Digital Asset Management (DMS), part of the Citadel Group, with access to proprietary tools developed by State Street that enable its ETFs to be created.
All in all, crypto ETFs are a great investment vehicle for beginners and experienced traders alike due to their benefits compared to trading Bitcoin directly.
What are the benefits of trading crypto ETFs?
Easier exposure to Bitcoin markets
There is no need to wire large amounts of cash to exchange with crypto ETFs. You can trade nearly all popular cryptocurrencies with just one click.
Access to market data of cryptocurrencies
With crypto ETFs, you can access cryptocurrency pricing and market information that a variety of trading platforms may use.
Easy access to buy or sell bitcoins without affecting the price
Since an ETF does not have a fixed net asset value, buyers and sellers are free to enter or exit positions at any time during trading hours. It allows ETF traders to rapidly move in and out of bitcoin without disrupting the market.
Insurance against loss or theft
Loss or thefts can occur on exchanges, but their cover against losses is limited since local authorities cover most investors’ losses up to a maximum amount, even though insurance claims within Australia would have to be made against the operator based overseas.
Protection from volatility
Crypto ETFs are a much more secure way of holding cryptocurrency as they can be redeemed for cash later, unlike coins that could have lost value by then.
Crypto ETFs allow you to trade in even during down markets
Losses can occur anytime, and anything can happen – there might be an exchange hack or your coin storage method could malfunction. The point is that with crypto ETFs such risks are mitigated; if something goes wrong, you will always get back at least 1 BTC’s worth of shares.
Trade crypto ETFs on margin
ETFs can be traded on margin, shorted and lent to other traders. You can also use CFDs (Contract For Difference) via some providers like Plus500, which will allow you to open long or short positions on cryptos without owning them. All these options are possible since crypto ETFs act like stocks.
Lower fees when trading crypto ETFs
There is a minimal fee attached when buying or selling shares in an exchange-traded fund – it’s usually much lower than direct exposures. The minimum initial investment required by DMS.Au is $5,000 compared with purchasing bitcoins directly, requiring large amounts of cash upfront depending on where you purchase them.
Crypto ETFs allow for flexible trading
Since crypto ETFs can be bought or sold in real-time during market hours, you’ll always have the flexibility to react to emerging trends. You won’t need to pay considerable fees when opening or closing positions within an ETF since they are traded on an exchange. Crypto ETFs are perfect for short term traders who work by buying low and selling high, rather than investors looking for long-term returns.