Intro to Bitcoin ETFs

In May 2022, ASIC permitted Australia’s first Bitcoin ETFs to be launched in the market, representing a significant milestone for Australian crypto investors. Financial institutions such as BlackRock, 21Shares, and Invesco have all created Bitcoin ETFs, supporting the crypto economy. 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 US investors with 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.

‌

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 such ETFs by Cboe, ASIC, and the SEC, marks a pivotal moment in the integration of cryptocurrencies into mainstream financial markets.

‌

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: 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.
• Regulatory: Uncertainties and changes in the legal landscape surrounding cryptocurrencies may affect the performance of Bitcoin ETFs.

How do you choose the right one?

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.

Furthermore, there exist a few crypto ETFs on the Australian market, including 21Shares Bitcoin ETF (EBTC), 21Shares Ethereum ETF (EETH), and Betashares crypto ETF (CRYP).

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

Source: Issuer Form S-1s. Securities and Exchange Commission EDGAR Online. Securities and Exchange Commission, 10 Jan. 2024, www.sec.gov/edgar.shtml.

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

‌

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