Given all the talk and hype surrounding crypto ETFs, let’s try to gain a better conceptual understanding about them. Traditional ETFs are essentially types of investment instruments and are classified as securities. Most ETFs track real-world assets such as gold, oil, and various other types of commodities.
Investors who acquire ETFs are able to get exposure to a certain asset without actually physically needing to buy it. For example, instead of going through the lengthy process of buying gold, having it get delivered, and safely storing it, you could simply buy an ETF that tracks gold. This way, you can potentially get the same returns from your investment as if you were actually in possession of the gold itself, minus a small fee.
An ETF can also be described as a fund whose shares investors can buy while being able to earn dividends or interest from their investment. Additionally, traditional ETFs have been used for many years in traditional financial markets to track benchmark indexes as well. These indexes include the US Dow Jones Industrial Average (DJIA), the NASDAQ-100, and the S&P 500.
Learn more about traditional and crypto ETFs via CryptoCompare’s guide.