Key Factors
The launch of the first-ever Dogecoin (CRYPTO: DOGE) exchange-traded fund (ETF) kicked off to a lot fanfare on Sept. 18. On the primary day of buying and selling, practically $17 million flowed into the ETF, and even longtime trade watchers had been stunned at how a lot buying and selling quantity there was within the REX-Osprey DOGE ETF (NYSEMKT: DOJE).
However this meme coin ETF might not be what you suppose it’s. Here’s what you want to know.
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All spot ETFs are usually not alike
The new Dogecoin ETF (buying and selling underneath the ticker image “DOJE”) kinda, sorta provides buyers publicity to the spot price of Dogecoin. Nonetheless, it does so in a method that, fairly frankly, could confuse many individuals.
The spot Bitcoin (CRYPTO: BTC) and spot Ethereum (CRYPTO: ETH) ETFs truly exit into the spot crypto market, buy the specified cryptocurrency, after which maintain on to that cryptocurrency on behalf of buyers. This manner, buyers get exact 1-to-1 matching to the crypto’s spot value.
However that is not what the REX-Osprey DOGE ETF does. It makes use of financial derivatives to create a spot Dogecoin place, shopping for and promoting these derivatives by a Cayman Islands subsidiary.
Picture supply: Getty Photographs.
So its buyers do not maintain Dogecoin, both straight or not directly. They maintain a “artificial” place that mimics Dogecoin’s spot value. Because the providing prospectus clearly tells buyers: “Investing in DOJE will not be equal to investing straight in Dogecoin.”
For brief durations, this would possibly produce correct 1-to-1 matching. Nonetheless, it is a completely different story over the lengthy haul. That is the precise downside confronted by the Bitcoin ETFs that launched earlier than the primary true spot Bitcoin ETFs arrived in 2024 — additionally based mostly on derivatives of the underlying cryptocurrency.
Is the brand new Dogecoin ETF best for you?
The new ETF makes use of a intelligent regulatory workaround. It is a lot simpler to get approval for the sort of ETF. And that explains why the REX-Osprey DOGE ETF was first to market.
However should you’re searching for true spot publicity to Dogecoin, it’s best to wait for brand new spot Dogecoin ETFs, maybe by the top of the 12 months.
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Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Idiot has positions in and recommends Bitcoin and Ethereum. The Motley Idiot has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially replicate these of Nasdaq, Inc.
