An ETF, or exchange-traded fund, is a type of investment fund that tracks the price of an asset or basket of assets, and trades on exchanges like a stock. In the context of cryptocurrency, there are two main types of ETFs: cryptocurrency ETFs and Bitcoin futures ETFs.

• Cryptocurrency ETFs: These are funds consisting of cryptocurrencies, and they track the price of a select individual cryptocurrency or even a group of cryptocurrencies. They are generally low-cost, more diversified, and require no real need to understand how crypto self-custody works, making them a simpler way of gaining exposure to the crypto market. The first cryptocurrency ETF started trading in October 2021: the ProShares Bitcoin Strategy ETF.

• Bitcoin futures ETFs: These ETFs issue publicly traded securities that offer exposure to the price movements of bitcoin futures contracts. Bitcoin is considered a commodity and is the underlying asset in bitcoin futures contracts. Bitcoins that sell for cash are said to trade on the “spot” market. With limited exceptions, the bitcoin spot market is not regulated by the CFTC or the SEC. Bitcoin futures contracts — like other commodity futures contracts such as corn futures, market index futures, or gold futures — are regulated by the CFTC and must trade on CFTC-regulated exchanges.

ETFs provide several benefits to investors, such as significantly lower ownership costs and outsourcing of the steep learning curve required to trade cryptocurrencies. They also allow more people to invest in cryptocurrencies without the necessary expenses and hassles of buying them, and eliminate the need for security procedures and excessive funds while providing a familiar investment type.