Why buy bitcoin ETF instead of bitcoin?
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.
While investing in spot bitcoin ETFs could save you the time and costs of exchanging and securing Bitcoins yourself, these ETFs do charge management fees or expense ratios to cover operational costs, diminishing your returns over time.
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.
Spot bitcoin ETFs offer multiple benefits to investors, including ease of access, direct exposure to the price of bitcoin and potential for price appreciation. However, there are potential drawbacks, such as price volatility, regulatory risk and higher fees.
IBIT enables investors to access Bitcoin within a traditional brokerage account, just like stocks, bonds, and other ETFs. Jay Jacobs: Convenience. IBIT can help remove operational burdens associated with trading and holding Bitcoin directly, as well as potentially high trading costs and tax reporting complexities.
A crypto futures ETF does not hold digital tokens. Instead, it invests in crypto futures contracts. Risks include the unregulated nature of crypto markets, even when trading through regulated exchanges in the U.S.
Extreme Volatility: Bitcoin is notorious for its substantial price fluctuations, making ETFs that track its price inherently high-risk investments. Investors must be prepared for the possibility of significant and rapid losses. Regulatory Uncertainty: This space for cryptocurrencies is constantly evolving.
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.
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.
What are they and what does it mean for investors? The US securities regulator has approved the first US-listed exchange traded funds (ETF) to track bitcoin, in a watershed moment for the world's largest cryptocurrency and the broader crypto industry.
Why ETF is less risky?
Key Takeaways. ETFs are less risky than individual stocks because they are diversified funds. Their investors also benefit from very low fees. Still, there are unique risks to some ETFs, including a lack of diversification and tax exposure.
Blockchain technology is neither banned nor under heightened scrutiny by most regulatory agencies. Blockchain ETFs primarily track the stock market prices of companies invested in blockchain technology. The first Bitcoin futures ETFs began trading in 2021, and Bitcoin spot ETFs began trading in January 2024.
ETFs and index mutual funds tend to be generally more tax efficient than actively managed funds. And, in general, ETFs tend to be more tax efficient than index mutual funds. You want niche exposure. Specific ETFs focused on particular industries or commodities can give you exposure to market niches.
They offer benefits such as simplified access, regulatory safety, market integration, and diversification. However, investors must weigh these against the downsides like loss of true Bitcoin ownership, higher costs, market hour limitations, tracking inaccuracies, and limited trading flexibility.
How Much Bitcoin Does BlackRock Own? The Blackrock's iShares Bitcoin Trust (IBIT) currently holds 341,520.7 BTC as of July 29, 2024.
| 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% |
For instance, if you're not tech-savvy, not interested in trading BTC against other altcoins, want long-term exposure without having to worry about safekeeping your crypto, and don't mind the higher fees, an ETF might be the better option.
The futures-based Bitcoin E.T.F.s can end up being more expensive because the contracts expire and must be sold and repurchased, or “rolled,” each month. Those costs can be potentially significant, particularly when the new contracts cost more than the previous month's, causing managers to buy high and sell low.
IBIT is a passively managed fund that seeks to track the spot price of Bitcoin, with the intention of providing investors with easy access to the cryptocurrency instead of worrying about the hassle of acquiring, holding, and trading it directly.
The SEC approved 11 spot Bitcoin ETFs on Jan. 10, 2024. Until then, regulators were reluctant to approve any spot Bitcoin ETF applications, citing concerns over market manipulation, fraud, custody, and investor protection.
Why is a bitcoin ETF so important?
A bitcoin exchange-traded fund (ETF) is a financial product that allows investors to gain exposure to the price movements of bitcoin without actually holding the asset itself. Shares of a bitcoin ETF are traded on traditional stock exchanges, making it easier for investors to participate in the cryptocurrency market.
A spot bitcoin ETF, similar to a stock, can be shorted, enabling investors to capitalize on anticipated price declines by selling borrowed ETF shares.
Why did Bitcoin's price fall after the approval of Bitcoin ETFs? The price fell due to factors like profit-taking, market expectations not meeting reality, regulatory warnings, and initial confusion due to misinformation about the approvals.
However, just keep in mind that you are not actually "buying Bitcoin" when you buy a Bitcoin ETF. Instead, you are buying exposure to the price of Bitcoin. In much the same way, when you buy an ETF tracking the S&P 500, you are not actually buying shares of every company in the S&P 500.
Additionally, increased market liquidity can drive investment, further supporting Bitcoin's price surge. Thakral believes that Bitcoin reaching $100,000 in 2024 is more feasible now than ever before due to several key factors.
