Exchange-traded funds can use futures as the assets that make up the fund. Futures ETFs give investors access to the futures market without having to trade on the futures markets. A futures contract is an agreement between a buyer and a seller based on an underlying asset.
What is an ETF & how does it work?
An ETF (a company) will purchase futures contracts and then offer a securitized version to investors. The ETF doesn't take possession of the underlying asset but continues to trade contracts to keep the futures ETF running. The fund will purchase contracts so that it mirrors the index that it is designed to track.
How do bitcoin futures ETFs work?
This buying and selling process occurs when the ETF is rebalanced. This provides a reliable way to gain exposure to Bitcoin's price fluctuations since the ETF directly reflects Bitcoin's price. Bitcoin futures ETFs, on the other hand, do not directly own Bitcoin.
What is futures trading and how does it work?
Futures trading requires lower margins and thus less capital in your trading account. The amount you “save” can be set aside for long-term appreciation, for example in ETFs or mutual funds. With ETFs, you are binding capital that could (perhaps) be of better use elsewhere.
