The introduction of spot bitcoin (BTC) exchange-traded funds (ETFs) may help institutional investors since, according to Goldman Sachs (GS) in a research, these products will enable them to trade a proxy with low management fees and participate more actively in options hedging and arbitrage techniques.
On Wednesday, spot bitcoin ETFs were finally approved in the United States, ten years after they were first suggested. This significantly increases access to the biggest cryptocurrency in the world. These innovative gadgets are set to go on sale today.
Additional advantages include the ability to trade in and out of the fund, better liquidity compared to Bitcoin access via private funds, lower tracking error compared to close-ended funds and trusts, and the fact that ETF vehicles leverage standard accounting and reporting processes in the context of portfolio management, according to the report.
In addition, the bank stated that investors will be exposed to Bitcoin without taking on the risks related to self-custody, and that the participation of well-known ETF providers like Fidelity and Blackrock (BLK) provides “experience and credibility in managing these vehicles.”
Goldman cautioned that potential downsides should also cause investors to exercise caution.
The bank raised the warning that “any long-term sustainable demand for spot BTC ETFs will be subject to product suitability and broader market adoption,” adding that “time to market and demand among institutional investors may not be immediate.”
The notice stated, “Investors rely on the ETF manager’s ability to effectively carry out the management strategy, which includes a number of risks, and do not own physical BTC.” The statement further stated that ETF trading hours are restricted to normal market hours, as contrast to the continuous trading that is offered on cryptocurrency native exchanges around-the-clock.
The research also cautioned investors about the possibility of market turbulence after the approvals.