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US Bitcoin ETFs Post Longest Run of Inflows as Token Nears Record 

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 Angel Garcia/Bloomberg

US exchange-traded funds investing directly in Bitcoin attracted net inflows for an unprecedented 18th straight day, a spurt of demand that has helped to lift the largest digital asset toward a record high.

Net subscriptions for the group of almost a dozen products stood at $15.6 billion through Thursday following a Jan. 11 launch, taking total assets to $62.3 billion, according to data compiled by Bloomberg.

Bitcoin pared gains after a report showed US job growth surged in May while the unemployment rate unexpectedly rose, painting a mixed picture of the labor market. The largest cryptocurrency traded at around $70,925 as of 8:36 a.m. in New York, while Ether was little changed at $3,785….Continue reading…

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Source: US Bitcoin (BTC) ETFs Post Longest Run of Inflows as Token Nears Record – Bloomberg

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Critics:

ETFs can be bought and sold at current market prices at any time during the trading day, unlike , which can only be traded at the end of the trading day. Also unlike mutual funds, investors can execute the same types of trades that they can with a stock, such as limit orders, which allow investors to specify the price points at which they are willing to trade, stop-loss orders, margin buying, hedging strategies, and there is no minimum investment requirement.

 

ETFs can be traded frequently to hedge risk or implement market timing investment strategies, whereas many mutual funds have restrictions on frequent trading. Options, including put options and call options, can be written or purchased on most ETFs – which is not possible with mutual funds, allowing investors to implement strategies such as covered calls on ETFs. There are also several ETFs that implement covered call strategies within the funds.

Many mutual funds must be held in an account at the issuing firm, while ETFs can be traded via any stockbroker. Some stockbrokers do not allow for automatic recurring investments or trading fractional shares of ETFs, while these are allowed by all mutual fund issuers. The most popular ETFs such as those tracking the S&P 500 trade tens of millions of shares per day and have strong market liquidity, while there are many ETFs that do not trade very often, and thus might be difficult to sell compared to more liquid ETFs.

The most active ETFs are very liquid, with high regular trading volume and tight bid-ask spreads (the gap between buyer and seller’s prices), and the price thus fluctuates throughout the day. This is in contrast with mutual funds, where all purchases or sales on a given day are executed at the same price at the end of the trading day.

Cryptocurrency ETFs invest in cryptocurrencies such as Bitcoin, Ethereum, or a basket of different cryptocurrencies. There are two types of crypto ETFs. Spot crypto ETFs invest directly in cryptocurrencies, tracking their real-time prices, and their share prices will fluctuate with the prices of the cryptocurrencies they hold.

On the other hand, future-based crypto ETFs refer to equities that do not invest directly in cryptocurrencies but rather in crypto futures contracts. These contracts are agreements to buy or sell cryptocurrencies at a predetermined price in the future. As a result, the share prices and price fluctuating trends of funds in these two types could be different, even though they hold identical cryptocurrencies and amounts.

It is a frequent topic in the financial press that ETFs have a quick growth. These popular funds, with assets more than doubling each year since 1995 (as of 2001), have been warmly embraced by most advocates of low–cost index funds. Vanguard is the leading advocate of index funds.

Barclays, in conjunction with MSCI and Funds Distributor Inc., entered the market in 1996 with World Equity Benchmark Shares (WEBS), which became iShares MSCI Index Fund Shares. WEBS originally tracked 17 MSCI country indices managed by the funds’ index provider, Morgan Stanley. WEBS were particularly innovative because they gave casual investors easy access to foreign markets.

While SPDRs were organized as unit investment trusts, WEBS were set up as a mutual fund, the first of their kind. In 1998, State Street Global Advisors introduced “Sector Spiders“, separate ETFs for each of the sectors of the S&P 500. Also in 1998, the “Dow Diamonds” (NYSE Arca: DIA) were introduced, tracking the Dow Jones Industrial Average.

In 1999, the influential “cubes” was launched, with the goal of replicate the price movement of the NASDAQ-100 – originally QQQQ but later Nasdaq: QQQ. The iShares line was launched in early 2000. By 2005, it had a 44% market share of ETF assets under management. Barclays Global Investors was sold to BlackRock in 2009. In 2001, The Vanguard Group entered the market by launching the Vanguard Total Stock Market ETF (NYSE Arca: VTI), which owns every publicly traded stock in the United States. Some of Vanguard’s ETFs are a share class of an existing mutual fund.

iShares issued the first bond funds in July 2002: iShares IBoxx $ Invest Grade Corp Bond Fund (NYSE Arca: LQD), which owns corporate bonds, and a TIPS fund.[109] In 2007, iShares introduced an ETF that owns high-yield debt and an ETF that owns municipal bonds and State Street Global Advisors and The Vanguard Group also issued bond ETFs.

New regulations to force ETFs to be able to manage systemic stresses were put in place following the 2010 flash crash, when prices of ETFs and other stocks and options became volatile, with trading markets spiking and bids falling as low as a penny a share  in what the Commodity Futures Trading Commission (CFTC) investigation described as one of the most turbulent periods in the history of financial markets.

These regulations proved inadequate to protect investors in the August 24, 2015, flash crash, “when the price of many ETFs appeared to come unhinged from their underlying value”. “ETFs were consequently put under even greater scrutiny by regulators and investors.” Analysts at Morningstar, Inc. claimed in December 2015 that “ETFs are a “digital-age technology” governed by “Depression-era legislation”.

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