Bitcoin ETFs: Know the Difference
46.0 | Together with Wynter : Get Paid to Test
Bitcoin: Futures vs. Spot ETF
Terms of the Week - Expense Ratio & Contango
Time to Ride a Peloton 🚲
A Conversation With…The Podcast 🎙
Together With Wynter: Get Paid to Test 💸
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Bitcoin Futures vs. Spot Bitcoin ETF
In 2021, it seems nearly every hedge fund wants a piece of Bitcoin. When it comes to Bitcoin Exchange-Traded Funds (ETFs), many capital firms have submitted approval to the Securities and Exchange Commission (SEC).
Last month, the SEC approved the very first Bitcoin Futures ETF through ProShares under the ticker symbol BITO. However, last week, the SEC rejected a Spot Bitcoin ETF through VanEck saying “the Cboe had not done enough to demonstrate it could prevent fraudulent trading to protect investors.”
So, what’s the difference? A Bitcoin Futures ETF is a fund offering exposure without directly holding Bitcoin while charging you an “expense ratio”. Instead, you own a contract that has the promise to buy or sell Bitcoin at a future date. This exposes the fund to rollover risk and “contango”. On the other hand, a Spot Bitcoin ETF allows for the immediate purchase of Bitcoin providing direct ownership of Bitcoin between buyers and sellers. This functions similarly to the crypto exchanges currently in existence today.
While a Futures ETF offers advantages to traders, there are significant disadvantages to retail investors. A Spot Bitcoin ETF would dramatically increase institutional investment to the cryptocurrency while also providing benefits to retail investors.
Our takeaway: Both ETFs are beneficial for overall adoption and exposure to the cryptocurrency. However, a Spot Bitcoin ETF approval is the true game-changer the industry needs and will one day see. Currently, we’d stay away from investing in a Bitcoin Futures ETF. You’d simply be better off buying the cryptocurrency directly and/or waiting for the approval of a Spot Bitcoin ETF.
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Expense Ratio
An expense ratio (ER), also sometimes known as the management expense ratio (MER), measures how much of a fund's assets are used for administrative and other operating expenses. An expense ratio is determined by dividing a fund's operating expenses by the average dollar value of its assets under management (AUM). Operating expenses reduce the fund's assets, thereby reducing the return to investors.
Contango
Contango is a situation where the futures price of a commodity is higher than the spot price. Contango often occurs when an asset price is expected to rise over time resulting in an upward sloping forward curve.
Peloton (PTON) -47% 📉
Peloton has been decimated over the past two weeks after reporting subpar earnings and showing weaker than expected guidance for the future. A pandemic darling in 2020 has become a post pandemic nightmare in 2021.
Thinking long-term and looking deeper, we see opportunity. The company has a world class CEO, a strong brand reputation, is innovating with new products such as the new “Peloton Guide" and plans to get back to basics.
Combining the numerous levels of bad news in 2021 with the extreme valuation drop in the company, we think this offers a good risk/reward opportunity to invest in what we consider the “Future of Fitness”. Take this chance to add Peloton to your portfolio as we expect an investment at this price to prove to be a an enjoyable ride and long-term winner.
More than $10 billion wiped from Peloton’s market cap since dismal earnings report. - CNBC
The Audio Series 🎙
On this week’s “A Conversation With” podcast, we welcomed Ben Miller, CEO and Co-Founder of Fundrise, a technology platform that brings institutional-quality real estate to everyone. He spoke about his history as a real estate investor, the challenges and rewards of building an innovative technology company, his insight on the real estate market and the future of Fundrise. Click here to listen to this engaging conversation.
📆 Wednesday, 11/17 @ 7PM ET : Kevin Svenson
This Wednesday, we welcome Kevin Svenson, a leading crypto analyst on Twitter and YouTube. Have a question you want answered? Drop it in the comments and join us live on Twitter Spaces to participate in the Q/A with the audience.
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