00:00 Welcome to Yahoo Finance Future Focus.
00:07 The Bitcoin price has rallied since the approval of multiple spot Bitcoin exchange-traded funds
00:13 or ETFs by the US Securities and Exchange Commission in January.
00:18 But what exactly is a spot Bitcoin ETF and why has it caused the price of Bitcoin to
00:23 surge?
00:25 So, spot Bitcoin ETFs operate in much the same way as a traditional ETF, but instead
00:32 of tracking a basket of stocks, for instance, spot Bitcoin ETFs track the current price
00:36 of Bitcoin.
00:37 Now, each share of the ETF sold corresponds to an equivalent amount of actual Bitcoin
00:43 held in reserve.
00:44 There are currently 11 spot Bitcoin ETFs in existence, offered by fund managers such as
00:49 BlackRock, Fidelity and Franklin Templeton.
00:53 These managers work with authorised participants who purchase Bitcoin for the ETF.
00:58 The acquired Bitcoin is then held in digital wallets by custodians such as Coinbase.
01:05 Each ETF issues shares representing the purchased Bitcoin, which are matched to the current
01:11 spot price of the underlying asset.
01:13 Now, these shares can be bought and sold on traditional stock exchanges, making it easier
01:18 for both regular investors and big institutions to invest in Bitcoin without actually owning
01:24 it directly.
01:25 For instance, BlackRock's iShares Bitcoin Trust ETF is listed on the Nasdaq, whilst
01:31 Fidelity's FidelityWise Origin Bitcoin BTC Fund is listed on the New York Stock Exchange.
01:37 This setup allows investors to gain exposure to Bitcoin without needing to directly manage
01:42 digital wallets or store private keys, which can be complex and risky for some investors.
01:50 Now, all of these dynamics have had an effect on the price of Bitcoin since the SEC's approval
01:56 of the ETFs in January of this year.
01:59 In the short term, increased institutional investment through spot ETFs has driven up
02:04 demand for Bitcoin, which has caused the digital assets price to depreciate.
02:09 The recent approval of spot Bitcoin ETFs by the SEC has also marked a shift in how regulators
02:14 view cryptocurrencies and given a certain level of legitimacy to Bitcoin as an asset
02:19 class and increased liquidity in the Bitcoin market overall.
02:23 Now, the UK's financial regulator, the Financial Conduct Authority, seems to be following in
02:29 the wake of its US counterpart after making a recent statement that it intends to allow
02:34 Bitcoin-backed exchange-traded notes, or ETNs, specifically for professional investors.
02:41 However, it's always essential to note that investing in Bitcoin and spot ETFs comes with
02:47 its risks.
02:48 Investors should be cautious and aware of the volatility associated with Bitcoin.
02:53 Additionally, investors don't actually take custody of the Bitcoin when investing in spot
02:57 ETFs, instead they rely on third-party custodians.
03:01 And as always, investors should be careful to consider their risk tolerance before investing
03:06 in these recently approved products.
03:09 Thanks for joining us.
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