The Tech Quiz - Season 29

Salam from my side! I have no doubt that everything will go well for you, I am doing well. In this blog I will talk about spot ETF, it's pros and cons also it's effect. I am moving to be part of this technical contest. This contest arranged by brother @malikusman1 . The title of this contest is

The Tech Quiz - Season 29

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What is spot ETF?

ETF stands for Exchange Traded Fund. This is an Exchange-Traded Fund (ETF) that invests directly in the underlying assets as opposed to futures or derivatives based on those assets is known as a spot ETF. The present price at which we an asset can be purchased or sold for prompt delivery is called the "spot" price. Spot ETF give to investors direct exposure to the performance of the asset by tracking the real market price of the asset it represents. Spot ETFs are more liked than futures contract using ETFs because of their reduced tracking inaccuracy, transparency and generally lower fees. Purpose of these is to replicate the performance of the underlying assets they own as closely as possible.

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PROS and CONS of ETF.

There are many pros of ETF , some I mentioned below:

• Its main pros is diversification. ETFs make broad range of assets. It helps to investor to diversify their portfolios and they can reduce risk by spreading investments. It can in various sectors, like industries or geographic regions.
• It's second main pros is lower costs. ETF have low expense than any mutual funds. This is because they managed and track an index than required active management.
• Liquidity is possible by ETF. ETF trade on crypto exchanges like stocks, in this they can buy and sell trading day at market prices. It also provide flexibility and liquidity.
• It provide transparency for it's holders. Most ETFs regularly disclose their holdings, that is why investors know exactly what assets the ETF is composed of.
• Tax efficiency is also possible by ETF. Due to its structure, ETFs are more tax efficient than any other mutual funds. They mostly incur fewer capital gains taxes because they experience lower portfolio turnover.

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Some Cons of ETFs are:

• Trading costs is backdraw of ETF. When ETFs have lower management fees, investors can trading costs, like commissions and bid ask spreads, especially if they trade fastly.
• It can create tracking error. ETFs can not perfectly replicate the performance of their assets due to factors like management fees, trading costs and liquidity issues. This lead to tracking error.
• It can creat liquidity risks in market. All ETFs are not highly liquid. Some of them have low trading volumes. It leading to wider bid ask spreads and difficulties in buying and selling shares without affecting the price.
• It can creat Market risk. Making any investment, ETFs can create market risks. The value of an ETF can up and down on the performance of its underlying assets.

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• This can make a lot complexity. Some ETFs, especially those involving commodities, leveraged or inverse strategies, can be difficult and can not be good for all investors. These ETFs can carry more risks.

Imapct of ETFs on crypto market.

Impact of ETF on crypto market are:

• First impact of ETF is Increased accessibility. It make easier for a large range of investors like institutional and retail investor to get exposure to cryptocurrencies. And without need to directly buy and store the digital assets.
• It increased legitimacy in crypto market.
• Improved liquidity is also positive impact of it. It help to make better liquidity.
  ETF help to growth market in crypto market which is good for market capitalization.
• It reduce barrier for investors to deal with others.
  ETF can make market volatility, this is not good for investors.
• It creat centralization risks in which investors may get loss.

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• It creates regulatory Slscrutiny in market which can be both positive and negative.
• It has great impact on prices in crypto market. In this price can up and down.