What is a spot bitcoin ETF and why it has sparked a crypto rally?

In this episode of Yahoo Finance Future Focus, our host Brian McGleenon explains what a spot bitcoin ETF is and how it differs from other investments. Spot bitcoin exchange-traded funds have emerged as a transformative tool in the crypto market, offering investors a straightforward means to gain exposure to bitcoin's price movements. Unlike derivatives-based ETFs, spot bitcoin ETFs directly invest in bitcoin, mirroring its current price.

Now, all of these dynamics have had an effect on the price of Bitcoin since the SEC's approval of the ETFs in January of this year. In the short term, increased institutional investment through spot ETFs has driven up demand for Bitcoin, which has caused the digital asset's price to appreciate. However, it's always essential to note that investing in Bitcoin and spot ETFs comes with its risks. Investors should be cautious and aware of the volatility associated with Bitcoin. Additionally, investors don't actually take custody of the Bitcoin when investing in spot ETFs. Instead, they rely on third party custodians. And as always, investors should be careful to consider their risk tolerance before investing in these recently approved products.

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