How to Easily Buy Bitcoin ETFs

SEC Approves First-Ever Spot Bitcoin ETFs, Boosting Crypto Community

The recent approval of the first-ever batch of spot Bitcoin (BTC) exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) has generated excitement and optimism within the global crypto community. The SEC has given the green light to 11 applications, including those from prominent financial firms like BlackRock, ARK Invest, Fidelity, VanEck, and Invesco.

This watershed moment is expected to be a game-changer for Bitcoin, as it will enable both institutional and retail investors to invest in the largest cryptocurrency by market share without having to directly hold it. Rather than buying Bitcoin on a crypto exchange like Binance or Coinbase, investors can now purchase Bitcoin ETFs to gain exposure to BTC.

Benefits of Holding Bitcoin ETFs vs. Bitcoin: A Simplified Approach

Bitcoin ETFs simplify the investment process for individuals by allowing them to buy a product that tracks the price of Bitcoin through the same mechanism already in place for index funds. This means that investors can manage their holdings without the need to maintain a crypto wallet or arrange for cold storage.

More importantly, Bitcoin ETFs provide registered investment advisers (RIAs), retirement funds, and other institutions with access to Bitcoin. Entities that were previously restricted from accessing this asset class or had reservations about investing in digital assets now have the opportunity to hold BTC.

The term “spot” in spot Bitcoin ETF refers to the actual holding of assets, not some derivative contract. Each investor will own a portion of Bitcoin, giving them direct exposure to its price movements. Investors can also opt for Bitcoin futures ETFs, in which they agree to buy or sell BTC at a specific price on a predetermined date, regardless of the market price. Bitcoin ETFs can be bought and sold as frequently as desired during trading hours.

Overview of Approved Bitcoin ETFs by Major Fund Managers

The SEC has approved spot Bitcoin ETFs from major fund managers, including the Grayscale Bitcoin Trust (GBTC), BlackRock’s iShares Bitcoin Trust (IBIT), the Bitwise Bitcoin ETF (BITB), Fidelity’s Wise Origin Bitcoin Trust (FBTC), the ARK 21Shares Bitcoin ETF (ARKB), the Invesco Galaxy Bitcoin ETF (BTCO), VanEck’s Bitcoin Trust (HODL), Franklin Templeton’s Franklin Bitcoin ETF (EZBC), the WisdomTree Bitcoin Fund (BTCW), the Hashdex Bitcoin ETF DEFI, and the Valkyrie Bitcoin Fund (BRRR).

These approved Bitcoin ETFs will be listed on various stock exchanges in the U.S., including the New York Stock Exchange (NYSE), the Chicago Board Options Exchange (CBOE), and the Nasdaq.

In October 2021, the SEC gave the go-ahead to Bitcoin futures ETFs that track agreements to buy or sell BTC at a pre-specified price. The first Bitcoin-linked ETF to receive approval from the SEC was the Proshares Bitcoin Strategy ETF (BITO), which is listed on the New York Stock Exchange.

While traditional ETFs typically offer a diversified basket of assets, a Bitcoin ETF is linked solely to Bitcoin. As a result, its value is likely to experience the same volatile swings as BTC itself.

Various Ways to Buy Bitcoin ETFs: Options and Emerging Trends

There are several ways to buy Bitcoin ETFs:

1. Online brokerage accounts: Investors can search for the desired fund using the brokerage’s search tool and trade it. Following the approval of spot ETFs in the U.S., these funds can be bought through brokerages such as Charles Schwab, Fidelity, Robinhood, and Interactive Brokers.

2. Cryptocurrency exchanges: While crypto exchanges are still navigating a rapidly evolving regulatory landscape, they are planning to offer ETFs. Kraken’s ETF trading services are expected in 2024, and Coinbase is acting as a custodian for eight of the SEC-approved ETFs.

3. Financial advisers: The Bitwise 2024 benchmark survey found that many U.S. financial advisers expressed interest in crypto equity ETFs. Some advisers can buy crypto in client accounts, with 98% of those currently invested in crypto planning to maintain or increase exposure.

4. Robo-advisors: Platforms like Wealthfront and Betterment facilitate the purchase of Bitcoin ETFs by providing low-cost, automated investing services. These robo-advisors offer customized portfolio management based on investor objectives and risk tolerance.

5. Traditional banks: Individuals can open a brokerage account with the investment division of a traditional bank to purchase Bitcoin ETFs. Availability and direct access to Bitcoin ETFs may vary by region and the bank’s offerings, while the regulatory landscape for cryptocurrencies continues to evolve.

6. Directly from ETF issuers: Investors can go directly to the ETF issuer’s website and purchase the ETF product. However, they may need an account with a broker to execute the transaction. For example, the Hashdex website requires customers to select one of the brokers the issuer works with.

Step-by-Step Guide: How to Buy Bitcoin ETFs through Brokerage Services

Here is a step-by-step process for buying Bitcoin ETFs through brokerage services:

Step 1: Open a brokerage account: Download a brokerage services app or open the web portal, complete the Know Your Customer checks, and log in.

Step 2: Fund the account: Fund the brokerage account using a linked bank account, checking or savings. Options include wire transfers, check deposits, or transferring funds from another broker.

Step 3: Conduct research on available Bitcoin ETFs: Evaluate key aspects of Bitcoin ETFs, such as the issuer and expense ratio. The expense ratio is the fee charged by the issuer for managing the ETF, impacting overall returns.

Step 4: Select preferred Bitcoin ETFs: Delve into a range of Bitcoin ETFs, selecting those that align with investment preferences and goals. Consideration should be given to various funds to identify the ones that best meet specific criteria.

Step 5: Place an order: Use funds in the account to place an order for the selected ETFs. Enter the Bitcoin ETF’s ticker symbol in the specific field provided on the trading or order placement interface, and specify the desired number of shares to purchase. Choose a market, limit, or stop order based on the trading strategy. After reviewing the order details, submit the order for execution.

Step 6: Monitor your investments regularly: Regularly review investments to respond to market changes and make necessary adjustments to ensure investments are on the right track.

The SEC’s approval of 11 spot Bitcoin ETFs provides institutional and retail investors with the opportunity to invest in a more regulated environment. Competition among ETFs has prompted several issuers to reduce management fees, and this influx of funds into the crypto ecosystem is expected to be significant. As other countries follow suit, Bitcoin may become integrated into the global financial mainstream.

While the approval has thus far been limited to Bitcoin ETFs, there is hope among the crypto community that ETFs for other major cryptocurrencies will eventually receive approval. Although the timeline for this approval remains uncertain, the current approvals are seen as a positive sign for the future of broader cryptocurrency ETFs.

Disclaimer: This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making any investment decisions.

Analyst comment

Positive news: The SEC approval of the first-ever spot Bitcoin ETFs is a game-changer for Bitcoin, allowing institutional and retail investors to invest in BTC without directly holding it. This is expected to lead to increased adoption and influx of funds into the crypto ecosystem. Market will likely see increased trading volume and price volatility as investors gain easier access to Bitcoin through ETFs. Other major cryptocurrencies may also seek ETF approval in the future.