The Tech Quiz - Season 29

It is always a wonderful privilege to be participating in Steemit contest and today I will be dropping my entry concerning the contest holding by @malikusman1. So stay tune

What is a Spot ETF?

Image Source

When we actually talk about the Sport Exchange-Traded Fund(ETF), we mean it is a type of investment fund that helps to hold the underlying asset of commodities, currency. It works in a way whereby by it reflects the real time market price of the assets in its portfolio. Most of the time, ETFs are actually traded using stock exchanges as this allows or enables investors to buy and even sell the shares all through the trading day using the markets prices.

Pros and Cons of ETFs

As much as ETFs have gained massive popularity in recent years, it has offered a whole lot of advantages but also not withstanding a whole lot of disadvantages which we will be looking into the pros and cons of ETFs.

Pros.

• Diversification.

The first pros I will definitely talk about is the fact that it has allow diversification. What do I mean by that, it allows broad spectrum of the assets or commodities and this helps to reduces the risk that is associated with you investing in a single securities or asset. This helps to avoid potential loss and not only that but also offers exposure to try out other wise range of markets.

• Liquidity.

The second one definitely is the liquidity. ETFs provide this high liquidity making it easy for investors to actually buy and sell even during the market hours and this makes it a flexible investment option.

• Cost-Effectiveness.

The third pros I will also be talking about is the aspect of the cost-effective. ETFs have this lower expense ratios as it is compared to the mutual funds that we are familiar with. This can help increase the potential returns for the investors.

• Transparency.

The last pros I will be talking about is the aspect of the transparency. ETFs disclose the holdings and this gives clarity for investors of what they own. This can really go a long way in influencing the investment decisions.

Cons.

Image Source

Like we all know, everything that have advantages also have disadvantages. Having discussed the advantages, let's briefly discuss the disadvantages also.

• Trading Costs.

The first one I will certainly be making mention of is the fact that the trading costs of ETFs can really be high most of the time because of the brokerage fees.

• Market Risk.

Even though a lot of people will want to deny this, ETFs are actually subjected to the market Volatility just like all other commodities as the value of the ETFs can fluctuate depending on the value of the underlying asset.

• Liquidity Risks.

The last one I will definitely be talking about is the liquidity risks. A whole lot of ETFs are actually liquids and sometimes markets can experience low trading volumes and this can create issues for buying and selling.

Impact of ETFs on the Crypto Market

In recent years and with the massive development of the ETFs in the crypto market, it has actually experienced this massive impact in both the positive and negative ways for the crypto markets which I will also be discussing about.

Positive Impacts.

Image Source

• Increased Accessibility.

The first one I will certainly talked about is the fact that it has helped to increase accessibility. It makes it easy for investors to have access to Cryptocurrency even without digital wallets.

• Market Legitimization.

The second one of course is it has increased the legitimacy of cryptocurrency and this has actually increased the trust in the financial markets.

• Liquidity Boost.

The laY positive impact is that it has helped to enhance liquidity boosts in a way whereby the more investors that are in the market, the liquidity improves.

Negative Impacts.

• Market Manipulation Risks.

Alright let me talk about the negative side and the first one on my list is the aspect of the market manipulation risks. Trading ETFs can actually increase speculations and even lead to manipulation in the market.

• Regulatory Scrutiny.

The second one is the Regulatory scrutiny. This has led to an increase in the compliance cost and even challenges for crypto related businesses.

• Diversion of Funds.

The last one before I actually conclude is the aspect of the diversion of funds. Funds in ETFs can divert capital aways even from the original investment and this can slow down development in the crypto space.

I am inviting @loveth01 @dprogress and @tripple-e to participate in this contest.