The release of XBT futures and BTC futures, coupled with the astronomic increase in the value of Bitcoin has caused more people to seek means of buying Bitcoin stock without investing directly in cryptocurrencies. It is then normal for questions like, “how to invest in Bitcoin ETF” to spike and we have answers to that question. So, without further ado, let’s get to it.
What is an ETF?
ETF stands for “exchange-traded fund” and describes a kind of investment fund where the price of assets like gold, stocks and oil can be tracked. These assets can then be traded on exchanges, just like conventional stocks. What this means is that investors have the option of buying and selling their holdings in this exchange-traded funds to other investors via the stock exchange.
What’s so unique about an ETF? Well, the major feature about ETFs is that they are relatively cheaper compared to mutual funds. This is because normally, ETFs are set up as passive index tracking funds. This gives investors access to different niche markets and asset classes which are usually difficult to invest in.
What is Bitcoin ETF?
Basically, a Bitcoin ETF is one where the underlying asset is Bitcoin. This means that when you purchase Bitcoin ETF, you’re purchasing the cryptocurrency, albeit indirectly. This is because you’re holding the Bitcoin ETF in your portfolio and this ETF tracks the real-time price of Bitcoin. Therefore, the difference is that when you invest in Bitcoin ETF, you have the luxury of trading Bitcoins without the struggles of buying and storing it.
Benefits of a Bitcoin ETF
Now that we’ve got the issue of “what is Bitcoin ETF?” out of the way, let’s explore some of the benefits of having Bitcoins as an asset class on an exchange-traded fund. One existing drawback to investing in Bitcoin is the complexity surrounding it. However, with the advent of Bitcoin ETF, the cryptocurrency will become open to a diverse set of investors.
This means that investors who were willing but hitherto unable can now invest in Bitcoin the way they would do for mutual funds and pension funds.
We’ve established that as a result of the advent of ETF, the crypto market will have new entrants. It is then expected that Bitcoin ETFs will cause the value of Bitcoin to surge. This is in tandem with the occurrence in the early 2000s where ETF for gold was set up and the price of gold surged drastically.
How to Invest in Bitcoin ETF - What is involved?
To begin the process, you need to do is to open an account with one of the existing brokers. After doing this, get access to the account and proceed to fund the account. Then, you can navigate to the tab where you can trade. Search for your preferred investment trust and take note of the conditions attached to doing business. This is extremely important.
After doing this, you’re free to decide on any amount of shares you want to purchase and then choose the type of order. Some platforms give you an opportunity to preview your order and this is just to ensure that everything is in order. Be sure to confirm that you have the correct details of the order and then proceed to authenticate the transaction.
Subsequently, you can carry out trades on the same platform without the need for a crypto wallet or a digital exchange.
How to invest in Bitcoin ETF - Where to look
The Greyscale Investment’s Bitcoin Investment Trust (GBTC)
A trust is a company that has a fixed amount of a particular commodity. Normally, investors come together to buy shares of this particular company and these investors are given contracts which serve to show ownership of these assets.
For example, a gold trust means that the company has a certain amount of gold that they own and investors are allowed to purchase shares that might be worth a fraction of an ounce of gold. Greyscale is a company that allows investors to purchase shares which translate to Bitcoins.
This company holds 175,000 Bitcoins and you are free to buy shares in this regard. One share of GBTC at the time of writing translates to 0.09196847 Bitcoins. Here are a few things to note about GBTC.
- It provides auditable ownership of cryptocurrencies via a traditional investment means. This means that the shares are in the name of the investor and can be used for tax purposes. The structure is also such that it can easily be transferred to beneficiaries.
- Shares of this GBTC can be held in some IRA, Roth IRA, and other similar accounts
- These shares can also be publicly quoted.
- One thing GBTC has in its favor is the array of trusted service providers backing it. Friedman LLP provides an annual audit for the firm while Davis Polk & Wardwell LLP is the legal counsel.
- Lastly, the assets are stored with Xapo Inc. This is a deep, cold form of storage and it is highly robust.
The future potential for Bitcoin ETF
The Commodity Futures Trading Commission (CFTC) has given a regulatory approval to include Bitcoin futures on the CME (Chicago Mercantile Exchange & Chicago Board of Trade) and the CBOE (Chicago Board Options Exchange). This is quite radical when you think of it and it opens the door for potential Bitcoin ETFs.
Being the major financial regulator in the United States, this regulatory approval can be hailed as a holy grail in the crypto scene. As a result, Bitcoin ETFs can be based on the regulated, publicly traded, and generally standardized Bitcoin futures.
Different strokes for different folks. Whether your question was “how to invest in Bitcoin ETF?” or you just wanted to get an idea of the topic, this article must’ve gone above and beyond, opening your eyes to the potentials of Bitcoin ETF.