After years of delay, the SEC has approved 11 Bitcoin exchange-traded funds (ETFs), so now you can trade the cryptocurrency as easily as stocks. Some of the ETFs are from well-known providers, including the Fidelity Wise Origin Bitcoin Fund (FBTC) and iShares Bitcoin Trust (IBIT)…others are more obscure such as ARK 21Shares Bitcoin ETF (ARKB) run by tech-stock guru Cathie Wood.
How they work: The new ETFs perform like the SPDR Gold Shares ETF, which lets you invest in gold without storing and protecting it yourself. Bitcoin ETFs mirror the prevailing market price of Bitcoin. Your shares are backed by actual Bitcoin stored in digital vaults managed by registered custodians.
Advantages of the new ETFs: Lower fees than charged by individual accounts on Coinbase or other trading platfoms…greater convenience and liquidity. You can buy the ETFs through many brokerages and in retirement accounts. Note: Vanguard does not allow Bitcoin ETF trading. Disadvantages: Bitcoin itself trades 24/7, but you can buy and sell the new ETFs only when the traditional investment markets are open.
Caveats for investors…
Don’t expect the price of Bitcoin to continue soaring. The price has doubled since last October in anticipation of the SEC approvals. While institutional and retail investors may warm up to Bitcoin as an alternative asset class and drive up future demand, many other factors influence Bitcoin prices.
Stick with the largest funds. Since launching on January 11, the iShares fund has gained over $5 billion in inflows, about $1.5 billion more than Fidelity’s ETF. FBTC has a 0.25% expense ratio but has waived its fee until August 1, 2024. IBIT charges a 0.25% expense ratio, as well.
