Bitcoin ETF is a crypto game-changer, but is it good news for investors?

WATCH: ETFs explained by Justin Urquhart Stewart on CGTN Europe

Unreliable, very risky and tough to understand. That's how Justin Urquhart Stewart, investment manager and business commentator, describes the newly-approved exchange-traded funds (ETFs) that track the price of bitcoin.

Bitcoin, a digital currency which operates free of any central control or the oversight of banks or governments, held steady on Thursday after regulators approved the first U.S.-listed ETFs to track the world's largest cryptocurrency in a game-changer for the industry which has been trying for more than a decade to launch such a product.

Urquhart Stewart is urging huge caution though. Asked if these approvals legitimizes cryptocurrency, he told CGTN Europe: "That is the big question. It's back in the mainstream so it will give it a level of credibility. But the trouble is, most people don't understand how they operate and don't really understand the risks. 

"Some people have made a lot of money out of it because it's glorified gambling. An awful lot of people have also lost an awful lot of money out of it. So we need to be extremely careful." 

The Securities and Exchange Commission (SEC) approved 11 applications for such products and is seen as a landmark move that could broaden its appeal to investors. But should investors be jumping headlong into such ventures?

"In terms of risk of losing money, it does happen quite a lot," added Urquhart Stewart. "Making money out of investment is a long term thing. You compound the dividends over time, and that's how you grow money. If you're actually just going to have a bet on that, that's why we have racecourses. I fear with this you're encouraging people who are used to tracker funds, ETFs and things like that, at a lower cost. 

"Now you're introducing something into it which they don't understand and that's going to be dangerous indeed. So for professional investors that's okay. But for (your average investor) with his or her well-earned funds, they're going to have to be very careful indeed." 

Urquhart Stewart emphasized the need for "regular, clear and understandable" cryptocurrency regulation.

"Even if there is regulation, you only have to look at banking over the past two decades," he warned, saying that banking regulation "didn't do a lot of good for anybody. It's important to be really skeptical over these things, especially with how it works, how it operates, the risks and how measurable it is. 

"When I invest in a business, I will have a reasonable idea what's likely to happen. Yes, there could be a crisis, but I can spread my risk. Unfortunately, spreading risks in this case will bring in other bitcoins. We've already seen some pretty strange ones arriving and I have no doubt there'll be more.

"So this, I'm afraid, will encourage an area of the market which is not sophisticated enough yet to really be in the mainstream. It's sophisticated enough for the professional punter to thoroughly enjoy - but for most investors, stay well clear."

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