An Exchange Traded Fund (ETF) is a regulated investment product that lets you gain exposure to an asset—or a group of assets—without directly owning them. In traditional finance, ETFs track stock indexes, commodities, or bonds. In crypto, they work similarly, but the underlying asset could be Bitcoin, Ethereum, a basket of cryptocurrencies, or even stablecoins.

How Crypto ETFs Work

A crypto ETF is a fund traded on a stock exchange that holds crypto-related assets. These can be:

• Spot-based: The fund directly holds the cryptocurrency (e.g., a spot Bitcoin ETF holds actual BTC in custody).
  

• Futures-based: The fund holds futures contracts tied to the crypto’s price, not the asset itself.
  

Investors buy ETF shares through their brokerage account, just like they would with any stock or traditional ETF.

Crypto ETF vs. Traditional ETF

Why Investors Like Crypto ETFs

• No need to manage wallets or private keys—avoids security risks of self-custody
  

• Easy access via traditional brokerage accounts
  

• Regulated structure—comfort for institutional investors
  

• Diversification if the ETF includes multiple cryptocurrencies

Spot Bitcoin ETF Example

The Spot Bitcoin ETF—approved in the U.S. in 2024—lets investors buy shares backed by real BTC held in cold storage. This made it easier for pension funds, hedge funds, and everyday investors to gain Bitcoin exposure without touching an exchange like Coinbase or Binance.