Investors in Dubai are always looking for new and innovative investment opportunities. With the recent boom in the crypto industry, many investors are now turning their attention to cryptocurrency ETFs.
These types of ETFs are exchange-traded funds that track the performance of a basket of cryptocurrencies. Crypto ETFs offer investors exposure to the cryptocurrency market without them having to buy any coins.
They launched the first crypto ETF in Canada in February 2018, and since then, several other countries have followed suit. There are now several crypto ETFs available to investors around the world.
The launch of cryptocurrency ETFs in Dubai would significantly boost the city’s status as a leading financial centre. It could also provide a much-needed boost for the cryptocurrency industry, struggling to gain mainstream adoption. The Dubai Financial Services Authority (DFSA) is currently drafting regulations for cryptocurrency ETFs. The DFSA is expected to release its final regulations later this year.
Once the DFSA’s regulations are finalised, several international asset managers will likely launch crypto ETFs in Dubai. It would significantly boost the city’s burgeoning asset management industry.
Advantages of cryptocurrency ETFs
Cryptocurrency ETFs offer several advantages over traditional investment vehicles such as stocks and mutual funds. You’ll find they are highly liquid and you can trade them on most exchanges 24/7. They are also relatively low-cost and offer exposure to a broad range of assets.
You also don’t need to think about storing and securing your cryptocurrencies. The fund manager will do this for you when you invest in an ETF.
Another advantage is trading cryptocurrency ETFs on major stock exchanges such as the Nasdaq and the New York Stock Exchange, and this means that you can buy and sell them during regular market hours.
Finally, investing in cryptocurrency ETFs exposes you to digital asset price movements without taking on the risks associated with buying and selling them directly.
The risks associated with investing in cryptocurrency ETFs
Risks associated with cryptocurrency ETFs
It’s imperative that you take note of the risks associated with investing in cryptocurrency ETFs. The value of these funds can be highly volatile, and they are subject to the same regulatory risks as other cryptocurrency investments.
Volatility risk
Cryptocurrencies are notoriously volatile, meaning their prices can go up and down in a short time. It makes them risky investments, particularly those who are not prepared to lose all of their money. While some traders and investors may see this as an opportunity to make quick profits, others will want to avoid the volatility altogether.
Regulatory risk
The cryptocurrency industry is still largely unregulated, and this means that there is a risk that governments could intervene and introduce regulations that could negatively impact the price of digital assets. For example, in September 2017, the Chinese government banned initial coin offerings (ICOs) and exchanges, causing the price of Bitcoin to crash by over 30%.
Security risk
Investing in cryptocurrency assets or ETFs also comes with a security risk. Cryptocurrencies are stored in digital “wallets”, which can be hacked. If you store your digital assets on an exchange, there is also a risk that the exchange could be hacked, and you could lose your money.
Fraud risk
The cryptocurrency industry is also rife with scams and fraud. Many ICOs have turned out to be nothing more than Ponzi schemes, while several high-profile hacks of exchanges have also been. Investors need to be very cautious before investing in any cryptocurrency-related product.
Bottom line
Overall, cryptocurrency ETFs offer a compelling investment proposition for investors looking to gain exposure to the cryptocurrency market. The launch of these products in Dubai would be a significant step forward for the city’s asset management industry and provide a much-needed boost for the cryptocurrency industry. If you are interested in trading the best crypto ETF in Dubai, contact Saxo Bank broker today.
