Investing in ETFs

ETFs – Are they now the safest way to invest in Bitcoin?


Given the popularity of Bitcoin and ETFs (exchange-traded funds), there was always the real possibility that these two investment tools would meet. The last 12 months have seen Bitcoin achieve record highs, coming in at over $68,000. ETFs have experienced growing popularity too and there are now trillions of dollars invested in them worldwide. 


A Bitcoin ETF has much to offer to investors. It closes the gap between those who are drawn to cryptocurrency and those who are bigger fans of more traditional investment methods. Perhaps you have no knowledge of what a Bitcoin ETF is. Maybe you’re new to the whole world of cryptocurrency. If that’s the case, read on and learn all that you need to know about bitcoin ETFs and what they have to offer. 


What is an ETF?


Before we get started looking at Bitcoin ETFs, it is worth taking a step back and considering what an ETF actually is. ETF stands for exchange-traded funds. In effect, these are investment vehicles that track the performance of a set asset or assets. One of the big draws of ETFs are that investors are able to diversify their investments without the need to actually own assets themselves.


Given what an ETF is, it should come as no surprise that a Bitcoin ETF tracks and mimics the price of this particular cryptocurrency. This allows for those who lack the knowledge, or the expertise, to reach out and spread their investments into the world of crypto without the need to ever own the currency itself. 


Surely I could just invest in Bitcoin


With a Bitcoin ETF only reflecting the performance of Bitcoin itself, you may wonder why you should bother. Perhaps, it would make sense just to buy Bitcoin directly and forget about ETFs. After all, by opting for a Bitcoin ETF, you are introducing a middleman and often, when it comes to investments, a middleman means more costs and fewer profits. While this may seem to make sense, there are numerous reasons why investors opt for an ETF.


What do the ETFs, fully regulated and centrally cleared bitcoin products, mean for investors? It means that they can now get in on all that crypto has to offer while bypassing the unnecessary complexities.


A Bitcoin ETF is an open-ended fund. This means that additional units can be created for investors by buying more. Bitcoin is priced in real-time and there is the ability to buy and sell at any time. As an open-ended fund, there is regulation and insurance in place all of which makes it a more secure experience for investors. 


If looking to invest in Bitcoin directly, you’ll soon realise that you need a degree of technical expertise. You’ll need to get to grips with a whole new terminology and navigate all the difficulties posed by exchanges. You will also find that you are responsible for your wallet and private key. Lose these and you lose access to all of your funds. With a Bitcoin ETF, the Bitcoin is stored independently through specialist custodians, in our case with Fidelity Digital Assets. These provide an added layer of security and also makes fears of lost access a thing of the past. 


Bitcoin ETF vs Stocks and Shares


The truth is, that when it comes to investments, there are always risks. Investors make their decisions based on what these risks are and the steps that can be taken to mitigate them. When you look at stocks and shares, there are three possibilities:


  • They can remain stable with no significant losses or gains
  • The stock market could crash and you could lose your entire investment 
  • The stock market could soar and you could see significant gains


When looking at Bitcoin, or other cryptocurrencies, there are risks here too. Investors have often feared the volatility that is displayed as well as lacking the understanding of the concept as a whole. As Bitcoin becomes more mainstream via the adoption of institutional investors, the wild swings in value may continue for a time however we hope, will settle somewhat. That being said, relatively speaking, crypto is in its infancy and if it takes off like other assets did when mass adoption took place, for example when Gold ETFs arrived in 2003 the asset underwent significant growth over the next few years, we could see the potential for dramatic returns over the coming years.


Opting for a Bitcoin ETF allows investors to benefit from its potential returns while they are shielded from the unnecessary complexities. In reality, combining stocks and shares alongside Bitcoin ETFs and other asset classes may be a way to help investors create a diversified portfolio. 


Do investors need a wallet or key to invest in a Bitcoin ETF?


In short, no. Bitcoin ETFs set out with the aim of creating a wallet less investment, and this is exactly what has been achieved. Investors are drawn to assets because of their potential gains and they have no desire to be entrenched in a process that requires a constant hands-on approach. 


Bitcoin ETFs are a safe and simple option that allows institutional, professional, and sophisticated investors to access this new digital asset class. Investors stand to benefit from all that bitcoin has to offer all while avoiding the associated acquisition, transfer, storage, and security risks. 


So how do I invest in a Bitcoin ETF?


Just as any other ETF, Bitcoin ETFs are a safe and simple investment product accessed by institutional, professional and sophisticated investors through their brokers or advisors.