Bitcoin ETFs: A New Way to Invest in Bitcoin Without Actually Owning It! (2024)

FAQs

Do Bitcoin ETFs actually own Bitcoin? ›

Spot bitcoin ETFs hold actual bitcoin, while bitcoin futures ETFs do not. Spot ETFs are designed to hold an equivalent amount of the underlying asset that is represented by the ETF. This gives investors direct exposure to the spot price of bitcoin without having to purchase or store it themselves.

If long-term price performance is your only investment goal, then the new Bitcoin ETFs make a lot of sense. However, you could prefer direct-asset ownership of Bitcoin if you are concerned about the regulatory or legal aspects of crypto.

However, investing in crypto ETFs is not without risk. The market is volatile, with prices fluctuating significantly in short periods. In addition, the regulatory landscape for crypto is evolving, and changes in regulations will undoubtedly impact the performance and availability of these ETFs.

Plus, bitcoin ETFs will make it easier for financial advisers to access the cryptocurrency for their clients who can afford to invest in alternative asset classes. But make no mistake, the price of a bitcoin will be just as volatile whether you invest in it directly yourself or through an ETF.

‍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.

Open a brokerage account: Select a company that offers spot bitcoin ETFs and open an online brokerage account. Fund the account: Many brokerage platforms allow you to fund your account from other brokerage platforms or a regular bank account.

The most important thing to remember about Bitcoin is that it is a high-risk asset. Never invest money that you aren't willing to lose. Treat Bitcoin as a means of slowly growing your existing wealth rather than an all-or-nothing gamble. As with other investments, it's important to hedge your portfolio.

Bitcoin ETFs are traded on the stock market, just like any other stock or exchange-traded fund. That means to trade bitcoin ETFs, you need a brokerage account. If you are looking to open an account, Buy Side's top brokerage picks include Fidelity, TD Ameritrade and more.

How does a Bitcoin ETF work? ›

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.

The largest Aggressive ETF is the iShares Core Aggressive Allocation ETF AOA with $1.80B in assets. In the last trailing year, the best-performing Aggressive ETF was AOA at 12.08%. The most recent ETF launched in the Aggressive space was the iShares ESG Aware Aggressive Allocation ETF EAOA on 06/12/20.

There are a few important considerations when choosing which Bitcoin ETF you want to purchase. The first thing to look at is each issuer's annual management fee. The current ETF offerings range in fees from 0.21 – 1.5%, with ARK Invest as the cheapest and Grayscale as the highest.

Bitcoin ETF investors merely get exposure to the price of Bitcoin. They never own the asset. ETF participants don't benefit from what Bitcoin stands for in the first place, which is to allow anyone to experience financial ownership and sovereignty.

The recently listed spot bitcoin exchange-traded funds in the United States continue to vacuum up bitcoins — now holding roughly 4% of the entire 21 million BTC +5.27% supply. Yesterday, total net inflows into U.S.-listed spot bitcoin ETFs were $472.6 million, according to data from BitMEX Research.

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.

On the flipside, investment in Bitcoin ETFs means that you do not own any BTC, but rather, shares of the fund that holds BTC. Similar to stock market trade, this also means that unlike self-custody management of BTC, there are limited trading hours with Bitcoin ETFs.