The recent approval of the first-ever Bitcoin investment funds by the United States Securities and Exchange Commission (SEC) has made crypto enthusiasts around the world very excited. The SEC has given permission to 11 companies, including popular ones like BlackRock, ARK Invest, Fidelity, VanEck, and Invesco. This is a big deal because it means that both big organizations and regular people can now invest in Bitcoin without actually owning it. Instead of buying Bitcoin directly from places like Binance or Coinbase, investors can buy these special funds called Bitcoin ETFs. This allows them to be a part of the Bitcoin market and potentially make money from its success.
What Are the Different Ways to Invest in Bitcoin?
When it comes to investing in Bitcoin, there are a couple of options you can consider:
- Buying and Holding Bitcoin: The first option is to actually buy Bitcoin itself and hold onto it. This means you become the owner of the cryptocurrency and can store it in a digital wallet. You would need to take care of its security and keep it safe from potential risks.
- Investing in Bitcoin ETFs: The second option is to invest in something called Bitcoin ETFs. These are investment products that track the price of Bitcoin without you needing to own the actual cryptocurrency. It’s similar to investing in a fund that follows the performance of Bitcoin. It’s a simpler way to invest because you don’t have to worry about managing a digital wallet or the security of your Bitcoin.
Bitcoin ETFs are especially useful for registered investment advisers, retirement funds, and other institutions that want to invest in Bitcoin but may have restrictions or concerns about directly owning digital assets. With Bitcoin ETFs, they can get exposure to Bitcoin’s price movements without having to hold the cryptocurrency themselves. Also read How Bitcoin ETF Approval Can Impact the Crypto Market.
There are two types of Bitcoin ETFs: “spot” Bitcoin ETFs and Bitcoin futures ETFs. Spot Bitcoin ETFs hold actual Bitcoin as assets, and when you invest, you own a portion of that Bitcoin. On the other hand, Bitcoin futures ETFs involve agreements to buy or sell Bitcoin at a specific price on a specific date, regardless of the current market price.
You can buy and sell Bitcoin ETFs just like you would trade stocks. This means you have the flexibility to manage your investments and make transactions during trading hours.
Remember, investing in Bitcoin, whether through buying and holding or through Bitcoin ETFs, carries risks, and it’s important to do thorough research and consider your own financial situation before making any investment decisions.
What Bitcoin ETFs Were Approved by the SEC and What Does it Mean for Investors?
On January 10th, 2024 the United States Securities and Exchange Commission (SEC) approved several Bitcoin ETFs from major fund managers. These approved ETFs include well-known names such as:
- Grayscale Bitcoin Trust (GBTC)
- BlackRock’s iShares Bitcoin Trust (IBIT)
- Bitwise Bitcoin ETF (BITB)
- Fidelity’s Wise Origin Bitcoin Trust (FBTC)
- ARK 21Shares Bitcoin ETF (ARKB)
- Invesco Galaxy Bitcoin ETF (BTCO)
- VanEck’s Bitcoin Trust (HODL)
- Franklin Templeton’s Franklin Bitcoin ETF (EZBC)
- WisdomTree Bitcoin Fund (BTCW)
- Hashdex Bitcoin ETF (DEFI)
- Valkyrie Bitcoin Fund (BRRR)
In October 2021, the SEC also approved Bitcoin futures ETFs, which track agreements to buy or sell Bitcoin at a predetermined price. The first Bitcoin-linked ETF to receive SEC approval was the Proshares Bitcoin Strategy ETF (BITO), which is listed on the New York Stock Exchange.
It’s important to note that while traditional ETFs offer a diversified basket of assets, a Bitcoin ETF is specifically linked to the price of Bitcoin. This means that it is likely to experience similar price swings and volatility as Bitcoin itself.
What are the Different Ways to Buy Bitcoin ETFs?
There are several ways you can buy Bitcoin ETFs:
- Online brokerage accounts: You can use online brokerage platforms like Charles Schwab, Fidelity, Robinhood, or Interactive Brokers. These platforms have search tools that allow you to find the specific ETF you want and trade it.
- Cryptocurrency exchanges: Some cryptocurrency exchanges, like Kraken and Coinbase, are planning to introduce ETF trading services. However, due to evolving regulations, this option may not be available immediately or in all regions.
- Financial advisers: According to a survey, many financial advisers in the US are interested in crypto equity ETFs. Some advisers can buy crypto for their clients, and they aim to maintain or increase their exposure to crypto in 2024.
- Robo-advisors: Robo-advisors such as Wealthfront and Betterment offer an automated investing platform. They may provide access to Bitcoin ETFs with low minimum balance requirements, making it easier for both beginner and experienced investors to invest in them.
- Traditional banks: Individuals can open a brokerage account with the investment division of a traditional bank to purchase Bitcoin ETFs. However, availability and access to these ETFs may vary depending on the region and the specific offers of the bank. The adoption of Bitcoin ETFs by traditional banks may also take time due to evolving regulations.
- Directly from ETF issuers: Some ETF issuers allow investors to buy their products directly through their portals. However, it’s important to note that you may need an account with a broker to complete the purchase. For example, when visiting the Hashdex website, you would be directed to select a broker that works with the issuer.
Remember, the availability of Bitcoin ETFs and the options for purchasing them may change over time, so it’s important to stay updated and consider the regulatory landscape when making investment decisions.
How to buy Bitcoin ETFs?
- Open a brokerage account: Download an app or visit a website for a brokerage service like BlackRock or Robinhood. Complete the required checks and log in to your account.
- Fund your account: Add money to your brokerage account using your linked bank account. You can do this by making a wire transfer, depositing a check, or transferring funds from another broker.
- Research available Bitcoin ETFs: Take some time to learn about the different Bitcoin ETFs that are available. Pay attention to important details like who is issuing the ETF and the expense ratio, which is the fee charged for managing the ETF. This fee can affect your overall investment returns.
- Choose the Bitcoin ETFs you prefer: Consider your investment preferences and goals when selecting the Bitcoin ETFs you want to invest in. Look at different funds and choose the ones that best match your criteria.
- Place an order: Use the funds in your account to place an order for the selected ETFs. Enter the ticker symbol of the chosen Bitcoin ETF in the provided field on your brokerage account’s trading interface. Specify the number of shares you want to buy. Depending on your trading strategy, you can choose between market, limit, or stop orders.
- Review the order details to make sure everything is correct, and then submit the order. The brokerage will execute the order based on your specified terms, and the Bitcoin ETF shares will be added to your portfolio.
- Monitor your investments regularly: It’s important to regularly check on your investments. This allows you to stay informed about any changes in the market and make adjustments to your investments as needed.
The approval of 11 Bitcoin ETFs by the SEC provides a regulated investment opportunity for both institutional and individual investors. With competition among these ETFs, fees for managing the products have been reduced, making them more accessible. This approval is expected to bring a significant influx of funds into the crypto ecosystem, and as other countries follow suit, Bitcoin could become more integrated into the global financial system.
Although only Bitcoin ETFs have been approved so far, there is hope that ETFs for other major cryptocurrencies could receive approval in the future. While the timing of such approvals is uncertain, the crypto community remains optimistic, seeing the current approvals as a positive indication for the potential future of broader cryptocurrency ETFs.