![]() ![]() Many people choose to invest for retirement in an individual retirement account ( IRA) or a 401(k) plan. Others may be restricted to buying and selling securities in their traditional brokerage accounts for various reasons. While almost anyone can open a Coinbase account, for instance, not everyone is comfortable doing so. In addition, not everyone has found that buying Bitcoin via a crypto exchange is for them. Widespread adoption of Bitcoin as an investment is relatively recent, and some people may be concerned about hacking or losing passwords or private keys needed to access their investment when it’s stored in a secure Bitcoin wallet. Some investors may feel safer getting exposure to Bitcoin in their portfolios by purchasing a professionally managed ETF than they do owning actual BTC. That said, shorter-term holders of an ETF may not mind the comparatively higher fees they incur because of the convenience provided by ETFs. Again, these fees clock in at about 0.5% on Coinbase. That means paying a trading fee again when you sell. Even HODLers who plan to stick with the cryptocurrency long term will need to sell portions of their holdings. You’ll also want to consider your exit strategy. Depending on the amount of Bitcoin you’re transferring, that likely works out to be pretty negligible but is still important to keep in mind. If that’s the case, you’ll likely be on the hook for withdrawal fees, which are typically pretty small but vary by exchange.Īt Coinbase, these clock in at 1% per withdrawal transaction. You should also consider if you’ll want to transfer your Bitcoin off of your exchange to a separate hot or cold crypto wallet. This is less than you would pay over the course of a year when you invest in a Bitcoin ETF, which all charge at least 0.65% per year.īut this trading fee isn’t all you have to keep in mind. You would likely pay around 0.5% of your purchase price as a fee. ![]() Say you want to buy Bitcoin on the exchange Coinbase. Here’s why: Cryptocurrency exchanges typically charge one-time fees to buy and sell Bitcoin, while owning a Bitcoin ETF incurs an annual expense ratio fee. Owning a Bitcoin ETF may be more expensive than simply purchasing Bitcoin on a crypto exchange. Tracking the price of Bitcoin doesn’t always replicate the performance of the underlying market, and there are extra costs as the managers roll forward the futures contracts they’re buying. Note that by attempting to earn money opposite to BTC’s price moves, the ProShares Short Bitcoin ETF (BITI) follows a slightly different strategy. Most of the Bitcoin ETFs included here use a similar strategy. If the price of BTC falls, it takes funds from the pool to pay for the losses on futures contracts. If the price of BTC is rising, BITO uses its gains to add to a pool of funding held in cash and Treasuries. As the contracts near expiration, the fund gradually sells them and buys longer-dated contracts. The fund buys positions in one-month CME Bitcoin futures contracts. Here’s how it works in the case of the ProShares Bitcoin Strategy ETF (BITO). They allow traders to speculate about how prices may move in the future with minimal upfront investment because they frequently use leverage, or borrowed money. SEC Chair Gary Gensler is on the record stating that given the novel character of cryptocurrency, relying on the proven and highly regulated futures market is a much safer approach for Bitcoin exchange-traded funds.įutures are an agreement between two parties to sell a particular asset at a future date. ![]() ![]() Instead, they hold Bitcoin futures contracts, and in some cases the shares of companies and other ETFs active in the cryptocurrency space.īitcoin ETFs don’t own Bitcoin because the SEC is concerned that BTC is traded on non-regulated cryptocurrency exchanges. None of the six ETFs on our list own actual Bitcoin. ![]()
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