Spot Bitcoin ETFs received approval in January 2024, changing the way individuals invest in spot bitcoin ETF. Online brokerages now offer ETFs, allowing regular investors to add Bitcoin to their portfolios without dealing with various crypto exchanges or wallets. These new Bitcoin ETFs don’t rely on futures contracts or other assets like the ones that came before them; instead, they track the price of Bitcoin directly.
What is a spot bitcoin ETF?
A spot bitcoin ETF (exchange-traded fund) is like a tool that allows regular people to invest in bitcoin without any problems. It is a mixed bag of investments that tracks specific things such as stock, bonds, currencies, and real estate.
Now the interesting aspect of a new spot bitcoin ETF is that they actually have bitcoin. Without dealing with the technical details, investors can be directly linked to the real market price of bitcoin.
How do spot bitcoin ETFs work?
The spot bitcoin ETF behaves like a wallet to secure the bitcoin. Special caretakers are available who handle this very efficiently to smooth the workings of the bitcoin ETF.
The purpose of this kind of ETF is to mirror the real price of bitcoins. It starts by buying and selling bitcoins from authorized crypto exchanges. To avoid any type of risk to these bitcoins ,they are stored in a digital wallet, which has some extra security layers.
The ETF creates shares corresponding to the set number of bitcoins it contains. The share price of the ETF must match the current market price of bitcoin. People can trade these shares on a traditional stock exchange. Thus, ETF shares match bitcoin prices, and sometimes it adjusts its holdings by buying and selling.
Authorized participants managed the whole process. They can change the shares according to the desires of people.
Bitcoin ETFs that are available for investment:
The world’s biggest asset manager and well-known names BlackRock, Invesco ,Invesco and 11ETFs are approved by US regulators. Here’s a list of the bitcoin ETFs in which investments can be made.
- Bitwise Bitcoin ETF
- BlackRock’s iShares Bitcoin Trust
- Valkyrie Bitcoin Fund
- Grayscale Bitcoin Trust
- VanEck Bitcoin Trust
- Invesco Galaxy Bitcoin ETF
- ARK 21Shares Bitcoin ETF
How to invest?
Investors can easily buy the ETFs by using their regular investment accounts. Ryan Firth explains it, demonstrating how easy it is to add a query to your account by logging in and using the phrase BTC.
Matt Maley says that, particularly in the early going, it’s a good idea to monitor the liquidity of ETFs.
“I think the best way to invest, especially early on, is to stay with the ones that are the most liquid, he said.
Investing in bitcoin directly is becoming very common; investors can use it to shop on Amazon. However, it is still wise to be careful when adding any new investment to your portfolio.
Almost a dozen US spot bitcoin exchange-traded funds (ETFs) had $4.6 billion worth of shares traded at the beginning of ETF trading. A report states that the BlackRock iShares bitcoin trust saw trades of more than $1 billion worth of bitcoin.
Read More: 7 Best ETF Trading Strategies For Beginners
Advantages of investing in spot bitcoin ETF:
Maley finds the low costs and the security of backing from big companies like BlackRock to be appealing.
Crypto fans have praised Bitcoin ETFs for expanding token access for regular investors and encouraging greater growth, liquidity, and adoption.
According to Sui Chung, CEO of data company CF Benchmarks, “an ETF bundles Bitcoin ownership in a widely accepted and accessible form, eliminating the necessity for investors, be they individuals or institutions, to physically hold Bitcoin.”
Things to be aware of before investing:
Volatility is the main cause of concern. For the average retail investor, the rollercoaster that was Bitcoin’s 60% gain in 2021, 64% drop in 2022, and more than doubled in 2023 may be too much to handle.
Also, take note of SEC Chair Gary Gensler’s phrasing when the decision was announced: ‘While we permitted the listing and trading of certain spot Bitcoin ETP shares today, we did not support or encourage Bitcoin. Given the many risks connected to bitcoin and goods whose value corresponds with bitcoin, investors should exercise caution.
Maley stated that investors need to understand that the price of Bitcoin is still subject to fluctuation, even though the trustworthy names behind the ETFs offer some comfort.
“It remains a highly conjectural matter.” “There will still be volatility,” Maley highlighted. “More people who can invest also have more people who can sell it.”
