What is the significance of the bitcoin ETF?
These shares are priced to reflect the current spot price of bitcoin and can be traded on traditional stock exchanges. Spot bitcoin ETFs make it easier for retail investors and traders to buy and sell an asset tied to the current value of bitcoin without needing to hold bitcoin itself.
Purpose Bitcoin ETF
BTCC. B tracks the performance of the TradeBlock XBX Index, and has seen gains of +48.57% and outflows of -$326.01 M since the beginning of the year 2024.
While the new spot bitcoin ETFs are designed to track the bitcoin price directly, they do not impact it in the same way. Buying a share of an ETF has no real-time impact on bitcoin's price through direct means. In fact, the bitcoin represented by the share is not even purchased until the next trading day.
The main advantage of investing in Bitcoin ETFs (Exchange-Traded Funds) is that it provides a way for investors to gain exposure to Bitcoin without directly owning the cryptocurrency.
| ETF | Expense ratio |
|---|---|
| iShares Bitcoin Trust (ticker: IBIT) | 0.25% |
| ProShares Bitcoin Strategy ETF (BITO) | 0.95% |
| Roundhill Bitcoin Covered Call Strategy ETF (YBTC) | 0.95% |
| Global X Blockchain ETF (BKCH) | 0.50% |
When investors refer to a 'Bitcoin ETF,' they are usually referring to a 'spot Bitcoin ETF'. A Bitcoin exchange-traded fund is an investment vehicle that seeks to track the price of Bitcoin. Bitcoin ETFs are traded on traditional regulated securities exchanges and are not available on cryptocurrency exchanges.
Positive aspects of ETFs
The 4 most prominent advantages are trading flexibility, portfolio diversification and risk management, lower costs versus like mutual funds, and potential tax benefits.
Simplicity: For most investors, buying shares in an ETF is far simpler than buying and holding crypto directly. To invest in crypto directly, you need to create a wallet, find an exchange to use, connect it with your bank account, and use the crypto exchange to buy and sell cryptocurrency.
Possible Reasons for the Price Decline
Once the approval was confirmed, investors may have decided to lock in profits, leading to a sell-off. Market Expectations vs. Reality: Some investors might have overestimated the immediate impact of the ETF approvals.
Bitcoin Trusts indirectly own Bitcoin through the trust's holdings. Conversely, a Bitcoin ETF (Exchange-Traded Fund) is a fund that tracks the price of Bitcoin and is traded on stock exchanges, just like a stock. ETF investors buy shares of the fund, which in turn owns Bitcoin.
Should I add bitcoin ETF to my portfolio?
Spot bitcoin ETFs make it easy to add the cryptocurrency to a 60/40 portfolio, but there's a chance it can turn your portfolio upside down. Bitcoin has delivered incredible highs and crushing lows over its history.
One of the biggest advantages of Bitcoin ETFs is the simplified access they provide to Bitcoin. Investors can gain exposure to Bitcoin's price movements without purchasing the cryptocurrency directly, avoiding the technical complexities of crypto wallets and exchanges.
ETFs or "exchange-traded funds" are exactly as the name implies: funds that trade on exchanges, generally tracking a specific index. When you invest in an ETF, you get a bundle of assets you can buy and sell during market hours—potentially lowering your risk and exposure, while helping to diversify your portfolio.
Potential Market Inaccuracy: ETF prices might not reflect real-time fluctuations in the Bitcoin market. Unlike the crypto market, the traditional markets shut down, for a while - and this means a discrepancy might enter the prices until it corrects itself.
No, spot Bitcoin ETFs do not pay dividends, as Bitcoins do not generate any income. The investment value of spot Bitcoin ETFs is derived mainly from the appreciation (or depreciation) in the price of Bitcoins.
BlackRock Inc.'s iShares Bitcoin Trust has become the world's largest fund for the original cryptocurrency, amassing almost $20 billion in total assets since listing in the US at the start of the year.
In this way, a spot bitcoin ETF allows investors to gain exposure to the current price of bitcoin without having to hold the asset itself. This is in contrast to bitcoin futures ETFs, which were approved for trading by the U.S. Securities and Exchange Commission in October 2021 and can only trade bitcoin futures.
BTCC is one of the most secure exchanges when trading with digital currencies, offers more than 68 different cryptocurrencies and accepts U.S. dollars through bank transfer and credit or debit card, offers 2-factor authentication, was the first chinese exchange and has never had security problems.
Bitcoin (BTC) is a cryptocurrency (a virtual currency) designed to act as money and a form of payment outside the control of any one person, group, or entity. This removes the need for trusted third-party involvement (e.g., a mint or bank) in financial transactions.
This indicates that while IBIT may offer lower returns compared to direct Bitcoin investment, it also provides a more stable and less volatile investment option. The maximum drawdown for IBIT was -22.79%, significantly smaller than Bitcoin's -93.07%, highlighting IBIT's relative stability.
