I scrolled too far up and motherfucking Lemmy ate my fucking comment. Fuck this Web 2.0 garbage. You get a shorter reply, yay. Also I’m not re-linking everything; search Wikipedia for anything confusing, like “futures market” or “spot market” or “basket of goods.”

A commodity futures ETF is a way to improve the arbitrage that an individual investor experiences, while also reducing their exposure to spot markets. In particular, an investor only holds shares in a fund, and the fund does the actual trading; also, the fund only trades futures, although they do typically have a “basket” which holds physical commodities at a secure location.

For example, I hold shares of precious-metals ETFs. This means that, unlike e.g. somebody who has gold coins in their safe at home, I have to trust that the ETF managers will still exist tomorrow and that the financial system will still honor their contracts; this is technically increased risk. But in exchange, I don’t have to physically receive and store any precious metals, and also I get theoretically better returns due to the implicit arbitrage in futures markets.

Fun fact: BTC is overpriced, mostly from grifters and miners pumping and hyping the market. However, arbitrage sees overpriced commodities as an opportunity, and a futures ETF can produce value for its investors merely by insisting that the commodity should be valued less. This is also why the spot ETFs were not approved by SEC; the spot market for BTC is quite volatile and it’s not clear that a BTC spot trader would produce value for investors.