A crypto spot ETF differs from a crypto futures ETF primarily in how they obtain exposure to the underlying cryptocurrency.
Underlying Asset
A crypto spot ETF is an exchange-traded fund that aims to provide investment results closely corresponding to the price of the related cryptocurrency by investing in the underlying asset, before fees and expenses. This type of ETF allows investors to gain exposure to the price movements of the underlying cryptocurrency without directly purchasing or managing the cryptocurrency themselves.
A crypto futures ETF does not hold the related cryptocurrency directly. Instead, it invests in crypto futures contracts, which are agreements to buy or sell the cryptocurrency at a set price on a future date. This provides indirect exposure based on the futures market price rather than the current price of the related cryptocurrency.
Price Tracking
Spot ETFs track the spot price of Bitcoin closely, so their value moves nearly in tandem with the crypto market price.
Futures ETFs may not track the price of the related cryptocurrency as accurately due to factors like contract rollovers, contango (futures prices higher than spot prices), or backwardation (futures prices lower than spot). These dynamics can cause tracking errors and additional costs.
Ownership and Custody
With spot ETFs, investors effectively own a share of actual cryptocurrency held in custody by the fund, storing in regulated and insured storage.
Futures ETFs usually do not involve ownership of cryptocurrency and avoid risks related to storing the asset (such as hacking), since they only hold derivative contracts.
Costs and Fees
Futures ETFs may incur higher transaction costs, compared to Spot ETFs, from continuously rolling over expiring contracts and may experience inefficiencies that impact returns.
Spot ETFs, however, do not face the costs associated with rolling futures contracts.
In summary, spot ETFs provide direct, straightforward exposure to actual cryptocurrency, reflecting its spot market price, whereas futures ETFs offer indirect exposure through derivative contracts and may experience price tracking deviations and additional costs.
Disclaimers
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