Bitcoin ETFs

Bitcoin ETFs are a new, secure, and low-cost option for retail investors to gain exposure to Bitcoin.

After years of anticipation, the U.S. Securities and Exchange Commission (SEC) granted approval for spot Bitcoin Exchange-Traded Funds (ETFs) on Jan 10th, 2024. This groundbreaking development provides investors a new, convenient, and low-cost way to participate in the cryptocurrency market. In this lesson, we will explore the significance of spot Bitcoin ETFs, why they are gaining attention as an attractive investment option for Bitcoin enthusiasts, and how to choose one.

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What is a Spot Bitcoin ETF?

A Spot Bitcoin ETF is an investment vehicle that holds Bitcoin directly. Unlike other bitcoin ETFs, in which bitcoin futures contracts are the underlying asset, bitcoins are the underlying asset of a spot Bitcoin ETF.

The approval of 11 such ETFs by the SEC marks a pivotal moment in the integration of cryptocurrencies into mainstream financial markets.

‌If you find this helpful read: What is an ETF?

What makes Spot Bitcoin ETFs attractive?

Spot Bitcoin ETFs can be a convenient, secure, and cheap option for retail investors to gain exposure to Bitcoin.

Direct Exposure: Spot Bitcoin ETFs enable investors to gain direct exposure to Bitcoin without holding the keys themselves.
Regulatory oversight: ETFs are listed on regulated stock exchanges and are accessible through retail investors' existing brokerage accounts, which are also under stringent supervision.
Low fees: Investors will pay lower fees to acquire holdings in bitcoin ETFs than they would if buying bitcoin directly through traditional crypto platforms.[i]
Convenient portfolio management: Investors can hold and track their Bitcoin ETFs in the same brokerage account as their other investments.

What are the risks?

While the approval of Spot Bitcoin ETFs introduces a significant development in the cryptocurrency investment landscape, investors need to be aware of potential risks associated with such financial instruments.

Volatility. Inherent Volatility of the cryptocurrency market: Bitcoin prices can experience substantial fluctuations, which may cause substantial losses.
Costs. Investing in Spot Bitcoin ETFs comes with costs and fees. Users should read the ETF prospectus to get a complete understanding of the fees and costs before investing.
Security. Cryptocurrency remains an ancient technology and parties holding large amount of digital assets have been targeted by hackers and criminals in the past.

Additionally, regulatory uncertainties and changes in the legal landscape surrounding cryptocurrencies may affect the performance of Bitcoin ETFs.

Investors should carefully consider these factors and be prepared for market dynamics that could affect the value of their investments.

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What are the available choices?

Currently, there are 11 Spot Bitcoin ETFs approved by SEC, including $iShares Bitcoin Trust, $BITWISE BITCOIN ETF, $ARK 21SHARES BITCOIN ETF, $FIDELITY WISE ORIGIN BITCOIN F, $WISDOMTREE BITCOIN FD, $INVESCO GALAXY BITCOIN ETF, $VALKYRIE BITCOIN FD, $VANECK BITCOIN TR, $FRANKLIN TEMPLETON DIGITAL HLD, $Hashdex Bitcoin Futures ETF, and $Grayscale Bitcoi.

Trading of all the 11 ETFs is supported on Webull, including in (self-directed) IRA accounts. Before you make a choice, check their annual fees online for reference.

Note: This is updated as of January 11th, 2024

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[i] Source: CNBC, https://www.cnbc.com/2024/01/10/spot-etfs-offer-an-easier-and-cheaper-way-to-invest-in-bitcoin.html

An Exchange-Traded Fund’s (“ETF”) prospectus contains its investment objectives, risks, charges, expenses, and other important information, and should be read and carefully considered before investing. ETFs are subject to risks similar to those of other diversified investments. Investing in ETFs involves risk, including the possible loss of principal. Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. ETF shares cannot be redeemed directly from the ETF. ETFs are required to distribute portfolio gains to shareholders at year-end, which may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading may also have tax consequences. An ETF’s expense ratio is the annual operating expense charged to investors.