What is Bitcoin Stock and Bitcoin ETF?

Assalaamu Aleikum everyone (may peace be upon all of you)! This time around let’s talk about bitcoin stock. What is it? Does such a thing even exist? We had a sister ask, what is bitcoin stock and is it like Forex (foreign exchange)? We’ll touch upon this and even dip into what is a Bitcoin ETF.

Video Transcript

As-salamu alaykum (peace be upon you) and thank you for joining me for another Islamic Bitcoin Q and A session. Today’s video, I actually wanted to touch upon Bitcoin Stock and Cloud Mining, but after giving it further thought I realized that cloud mining, that really does need to be a video all on its own because there is quite a few things I would like to cover.

So Insha’Allah, the next video I have coming up we’re going to touch on cloud mining. And my hopes are to get into what are the cloud mining services that I think are good to look at. Also, I’d like to touch on my own experience with cloud mining services.

And then also look at what I think is probably the most important thing to pay attention to or at least one of the most important things to pay attention to when it comes to choosing what cloud mining service to go with. So Insha’Allah, make sure you check out the next video I have coming up. And like I said, we’re going to get into cloud mining at that time.

But for today, we’re going to touch upon the question that one of our sisters asked us. I say sister. I believe it’s a sister. I was looking at the name and the name looks like a sister but if it’s a brother, please forgive me but I’m thinking it’s a sister so we’re going to roll with that.

All right, so our sister asked, what is bitcoin stock? What is bitcoin stock and is it like Forex? Forex meaning Foreign Exchange. So, let’s go ahead and jump into answering that question.

What is Bitcoin Stock?

Ok, so what is a stock? A stock is a financial instrument, an investment instrument that is issued by a company, by a corporation that is publicly traded on a stock exchange, right? Now, there are thousands upon thousands of companies out there, corporations out there, if you see their logos, you would know most of them.

Some of those companies are actually traded on a stock exchange. I live in the United States so the stock exchange that we deal with is the New York Stock Exchange.

If you live in England or Japan, Malaysia, China, Canada, The United Arab Emirates, you know all those particular countries have their own stock exchange where the local companies in the local market of that country allow the everyday person, like me and you, they allow us, they give us the opportunity to invest in that company and by doing so, they issue to us a stock. A stock says that you have part ownership in that company.

Now, what does that mean as it relates to bitcoin? Well, with bitcoin, there is no such thing as a bitcoin stock. And why is that? The reason being is because bitcoin is not a corporation. bitcoin is not a company. You cannot invest in the company of bitcoin and ask the company “Hey let me get a share or two of that, I would like to invest in that company.”

Bitcoin doesn’t work that way. What you can do is you can actually buy a bitcoin or a bit of a bitcoin. You can actually purchase a bitcoin itself. So, there’s no such thing as bitcoin stock because it simply doesn’t exist.

There is no such thing as bitcoin stock.

…Andre Rishi

Bitcoin as we know is a decentralized computer protocol. It’s a protocol, an open source protocol that is setup that allows people to exchange assets peer to peer, now we use it as a, we use it as a currency. So yes, so there was no such thing as bitcoin stock. So, don’t let anyone fool you into thinking there’s anything such as a bitcoin stock, all right?

What is Foreign Exchange (FOREX)?

Now, let me– I’m going to talk about ETFs. What is an ETF because I believe that some people may be getting an ETF confused, or a bitcoin ETF confused, with actual stock, what a stock is. But before I do that, I would like to address the second part of the sister’s question and she was asking is stock like Forex, Foreign Exchange. And the answer is, no. No, it is not.

So what is Foreign Exchange? Foreign Exchange, simply put, is when a person buys a particular currency, whether they buy the British Pound, the Nigerian Naira, the Somali Shilling, the Canadian dollar, the American dollar, they buy a particular currency with the hopes that the value of that currency will rise.

When the value of that particular currency rises and it rises to the point where it is more than what they purchased for that currency, they will then sell that currency to make a profit.

So, somebody, let’s say, they have the – let’s see, I don’t know the – and let’s just go with the American dollar. And they want to buy the Chinese Yuan. I think it’s called the Yu-anh or the Yu-en. Somebody can correct me on that.

But let’s say someone has the American dollar there in you’re, they’re in the United States and they say, “You know what? I have American dollars, I’m going to purchase some Yuan with the hopes that I’m going to watch China’s market and see what happens.

And if after a while, I see that their market is flourishing, it’s doing good, and the value of their currency begins to rise. Let’s just say I bought $10 worth of Chinese Yuan and I see that now the value of the Yuan has risen to the point, if I wanted to sell it, it’s now worth $20, right? I can get 20 US dollars back.” So that person will then sell that currency in order to make a profit.

This is what is known as Foreign Exchange. It’s the buying and selling of the currencies of different nations in order for that person to make a profit. So this is Forex, so this has nothing to do with bitcoin stock and I hope this answers the question of our sister in regards to what is bitcoin stock. Again, it doesn’t exist. And even if it did, it’s nothing like Forex, Foreign exchange.

What is a Bitcoin ETF?

Now, let’s talk about ETF or what is known as Exchange Traded Funds. Yes, Exchange Traded Funds, ETF. So, let me go ahead and explain this and Insha’Allah, do this in a way that’s really not so complicated. So let’s start up by talking about the average Bitcoin user who is a little bit tech savvy, right?

A little bit tech savvy, so that person if they wanted to purchase bitcoin, what they would do is they would go online, they would find a popular exchange that they would trust, maybe BitPay, Coinbase or something of that nature.

They would go on there, they would create an account. It creates a wallet for them. They’ll be able to look and see and purchase bitcoin. They can store it in their wallet on the exchange. They can even use that wallet to go out there and buy goods and services with their bitcoin. Someone may do that.

Another person might say, “You know what I’m going to go and I’m going to download the Bitcoin Core wallet or all these other wallets out there, Mycelium, Exodus. I may have them on my desktop. I may have a wallet on my Smartphone. And I’ll use this to either store my bitcoin or even use it to go out there.

Maybe I might want to buy coffee with that or a car or a shirt, a camera, whatever. Whatever goods and resources I need, I will go ahead and manage my bitcoin myself and I’ll go out there and purchase goods and services as I see fit.

Another person might say, “You know what? I really just want to buy bitcoin and just… I think what I’m going to do is I’m going to put my bitcoin in cold storage.” So I’m going to create an offline wallet, again, known as cold storage, I’m going to hold on to manage my own you know public and private keys and I’ll store my bitcoin for myself, this is what I’m going to do, right?

Now, in order to do this, it does take some kind of tech savviness to understand all this. So, people such as yourselves who are probably involved in Bitcoin right now, you fall into that group of people who have some type of tech savvy skills that allow you to do this.

But many people out there do not. So there are some people who’ll say, “You know what? I really like Bitcoin. It looks great. I would love to be able to invest in it in a halal way and then Insha’Allah hold on to it for a little while and then later on in the future, sell it Insha’Allah for a profit.”

But I don’t want to do any of this thing, I don’t want to go on to an exchange, download or what the, a Bitcoin Core wallet and what’s this thing about private key, public key, cold storage and that’s just too much… hard wallet.

You know, it’s too much, too confusing for them. So for those particular people, some of those people are used to the more traditional, the traditional form of financial instruments like how a stock market works and how mutual funds work, things of that nature.

So here now is where we introduce the concept of a bitcoin ETF. And a bitcoin ETF is a company that stores bitcoin and allows the everyday person to come to them and purchase a share of bitcoin. You can purchase bitcoin through an ETF, a share of that bitcoin, a piece of that bitcoin.

And the company says, “You know what? You don’t have to worry about where to get the bitcoin from, I already have it. You purchase a share from me, you don’t have to worry about storing that bitcoin, you done need to worry about creating a wallet, private key, public key, cold storage, any of that stuff.

I’m going to take care and manage all of that for you. All you have to do is purchase a share and let it sit for a little while and then when the time is right, and you’re ready to sell if you would like to, if you’ve made a profit, I would give you your share of bitcoin that you bought and any profit that you have from that minus any fees, minus any fees. But I will go ahead and manage all that for you. You don’t have to worry about it. You don’t need to think about it. Go about your daily life, I’ll manage your whole thing for you.”

A lot of people like this. So what’s the catch? The catch is like I said the service fees or what it may commonly be referred to as the premium. The premium price that you pay for that company to manage that bitcoin asset for you. And the premium can be very, very high.

So ETFs already exists, you have ETF companies that store and manage gold, some silver and now bitcoin. At that time of the recording of this video, you have the Winklevoss I believe they’re called the Winklevoss twins. I maybe saying their name wrong, God forgive me (astaghfurlah).

So, the Winklevoss twins who are looking to create a bitcoin ETF and it’s going to go by the name of Coin I believe. I think it’s going to be traded on the market under the C-O-I-N under the name Coin.

You have another company called SolidX that is also in the running of looking to create a bitcoin ETF. So, their hopes of that all the people who are used to purchasing stock will – if they want to get involved in purchasing bitcoin, they will use their service, their bitcoin ETF as a means to purchase a share of bitcoin, a piece of bitcoin.

And this is where sometimes people, they say ETFs are likened to a stock because you can purchase a piece of bitcoin or a share of bitcoin through the bitcoin ETF company.

So people say this is like stock because they say what happens is that person purchase that share of bitcoin, that piece of bitcoin. They let it sit for a little while and then they sell it later or they trade it later very much like a stock.

So, people compare an ETF to a stock even though it’s technically not a stock. We’ve already talked about what a stock is, how it works and we’ve already established there’s no such thing as a bitcoin stock. So, when you use an ETF though, people say that this is like a stock, it works like stock exchange, you purchase it, you let the company hold it for a while and you sell it later on and hoping you can make a profit Insha’Allah. So, this is what – this is what a bitcoin ETF is.

Now, the big question is what is the Islamic ruling on an ETF? The honest answer is I do not know. I do not know. This is something that I need to study up on more and once I do that Insha’Allah, I will create another video, Insha’Allah, and update all of you Insha’Allah as to what is the Islamic ruling on an ETF.

I cannot advice whether it is halal or haram. I cannot do that right now simply because I do not know.

But I am looking to actually step into an Islamic finance course Insha’Allah that will start next month I believe in March. And Insha’Allah, I’m doing this as a way to – it’s always for the Muslim to attain beneficial knowledge that allows them to practice their deen in the best way.

So, Insha’Allah, my goal is to start taking courses on Islamic finances so that I can be of benefit to myself and my family and also to all of you who are watching these videos and you come to the Islam and Bitcoin you know website in order to learn more about this new cryptocurrency, this new digital currency that is out there. So, Insha’Allah, in the future, I will have an answer for you on the Islamic ruling of an ETF. Ok?

So hopefully, that answers this sister’s question in regards to what is a bitcoin stock, you know what is Forex, Foreign Exchange and now stepping a little bit into an ETF, a bitcoin ETF or Exchange Traded Fund.

So insha’Allah, that answers those questions and any comments you may have, any questions, please go ahead and leave comments below. I normally respond faster to the comments that are left on the Islam and Bitcoin website.