With Bitcoin being the best-performing asset of the year
more often than not during the last 15 years, many investors want to gain
exposure but doing so can be tricky.
For retail and institutional investors alike, questions of
regulatory and tax compliance can be puzzling. Then, there’s the challenge of
learning to navigate a new ecosystem. Using exchanges, sending transactions,
and taking custody of coins can take significant time to learn.
Fortunately, there are ways to gain exposure to Bitcoin
without purchasing and holding the asset itself. This can be done in a standard
brokerage or retirement account.
This article will explore the avenues available for tapping
into the Bitcoin market in this way, including exchange-traded Funds (ETFs),
public companies with Bitcoin holdings, and mining companies.
ETFs in general have become a popular vehicle for investors
looking to diversify their portfolios without directly purchasing the
underlying assets. Spot Bitcoin ETFs
offer a straightforward way to invest in Bitcoin through a regulated framework,
and have been very successful since their initial launch in the US on January
10, 2024. The first gold ETF took 2 years to reach $10 billion in AUM.
Blackrock’s IBIT accomplished the same in just 2 months.
Investors track the price of Bitcoin and trade on traditional
stock exchanges, providing liquidity and accessibility to investors who may not
otherwise be able to access cryptocurrency
markets or don’t want to hold Bitcoin itself. Some of the most dominant spot ETFs in the US include BlackRock’s IBIT,
Fidelity’s FBTC, and ARK’s 21 Bitcoin Shares.
Here are some important things to
think about when it comes to selecting a spot Bitcoin ETF:
- Custodian: How does the issuer store their coins? All
the ETFs use Coinbase
as their custodians, with a few exceptions:
- Fidelity secures their own
Bitcoin internally, - VanEck uses BitGo rather than Coinbase,
- Hashdex
selected BitGo as its
custodian.
- Fees: What expense ratio does the fund charge?
BitWise has garnered attention for having the lowest fee at just twenty basis
points. On the other end of the spectrum, Grayscale charges 1.5%. - Transparency: How much do you value transparency when
it comes to your funds’ holdings? So far, BitWise is the only
fund that has published the public key to its wallet, allowing anyone to view
the blockchain transactions that prove the fund holds what it claims to.
Fidelity
stands out, as being a veteran in the digital asset…
