Investors are beginning to see the recent approval of a spot Bitcoin ETF, the first in a decade, as more than just a temporary hype. The spot Bitcoin ETF offers significant differences from holding Bitcoin (BTC) on exchanges, potentially attracting investors who want to allocate a portion of their portfolio to higher-risk assets.
In the United States, ten asset managers have initiated the launch of multi-billion dollar spot Bitcoin ETFs with SEC approval. These ETFs are considered a safer investment option compared to holding BTC on exchanges, which are vulnerable to attacks and risks.
Despite the recent Poloniex incident in 2023, which resulted in a major loss, centralized exchanges have never been able to completely eliminate the risk of hacks, unlike DeFi platforms which have been frequently targeted over the past few years.
According to Ophelia Snyder, co-founder of 21Shares and its parent company 21co, a spot Bitcoin ETF is structurally different from holding BTC on centralized exchanges. 21Shares, which recently had its ARKB ETF approved and manages numerous crypto ETPs in Europe, emphasizes the importance of using multiple wallets to reduce the risk of a single point of attack.
Snyder also highlights the differences in the bankruptcy process for spot Bitcoin ETFs. In the event of an issuer’s bankruptcy, customers can directly reclaim the underlying assets of their ETFs through a custodian, in this case, Coinbase Custody. This ensures that the assets are protected and cannot be moved by the ETF issuer.