Should You Invest in a Bitcoin ETF?, #185
The SEC recently and historically approved 11 Bitcoin spot ETFs on January 10th. This is big news because now you can invest in Bitcoin through a brokerage account. On this episode, I’m discussing what this means for you, how you can invest in Bitcoin ETFs, and what to look out for if you're going to take that plunge.
You will want to hear this episode if you are interested in...
What is Bitcoin? [1:42]
Unpacking Bitcoin ETFs and three things to look for when buying [5:39]
Should you buy a Bitcoin ETF? [8:59]
Understanding Bitcoin
In a nutshell, Bitcoin is a digital currency born in January 2009, untethered to any government or traditional financial institution. With an estimated market value of $8.2 billion, it pales in comparison to the colossal $40 trillion market cap of the S&P 500. There are 19 million Bitcoin coins in existence, with a cap of 21 million expected to be mined by the year 2140. Its appeal lies in being decentralized and ostensibly untraceable by governments, making it a preferred mode of transaction for some.
Originally intended for small online transactions, Bitcoin's unique blockchain technology was poised to revolutionize banking, but its high costs and complex payment process have hindered widespread adoption. To invest, one typically turns to a crypto broker, distinct from a stockbroker, and must safeguard private keys to validate ownership. Despite concerns about fraud and lost keys, the recent approval of Bitcoin spot ETFs has opened new doors, changing the landscape of Bitcoin accessibility for investors.
All about Bitcoin ETFs
If you're considering diving into the world of Spot Bitcoin ETFs, here's a quick guide to help you navigate the options. The SEC recently greenlit 11 Bitcoin ETFs, and you might be wondering why so many. Well, it's all about competition. Unlike traditional mutual funds, ETFs, or exchange-traded funds, trade in real-time when the markets are open. This means you can buy or sell them while the markets are open, and the price is determined at the time of your transaction.
When choosing a Bitcoin ETF, focus on three key factors. First, check the trade volume – opt for an ETF with high trading activity for easy transactions. Second, consider the spread, which is the difference between the bid and ask prices. A narrow spread minimizes the extra cost you pay when trading. Lastly, look at the annual expense ratio – aim for the lowest possible without compromising on trade volume and spread. Notable players in the Bitcoin ETF arena include BlackRock's IB and Fidelity's FBTC, both boasting low expense ratios. Remember, thorough research is key with 11 options available, each with its unique features and costs. Listen to this episode for more on Bitcoin ETFs!
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