Where to purchase the latest Spot Bitcoin ETFs : A guide in 2024

Following the SEC's recent approval of spot bitcoin ETFs, investing in Bitcoin has become more accessible for everyday investors looking to enter the cryptocurrency market.

For investors and traders alike, purchasing a spot bitcoin ETF mirrors acquiring shares in other ETFs or securities. These ETFs are accessible through various traditional platforms that offer popular services such as stock and options trading, retirement planning, advisory services, and automated investing. Available on established exchanges like the New York Stock Exchange and Nasdaq, these ETFs enable investors to gain exposure to bitcoin's potential without needing to manage crypto assets directly or understand cryptocurrency platforms. However, prospective investors should thoroughly understand how these ETFs function and consider the associated risks before making investment decisions.

Where to purchase Spot Bitcoin ETFs

Spot bitcoin ETFs are now available for trading on various online brokerage and robo-advisor platforms. These ETFs can also be used in a range of retirement accounts, including Bitcoin IRAs, traditional IRAs, Roth IRAs, and solo 401(k) plans.

When selecting spot bitcoin ETFs, it's crucial for investors to carefully evaluate the associated fees. Currently, many issuers are offering fee waivers to incentivize investments. For instance, Bitwise is waiving the sponsor's fee for the first six months, and Ark Funds has temporarily waived all fees.

It's important to recognize that these platforms offering fee waivers for bitcoin ETFs are competing for investor attention, and these waivers are typically temporary. Additionally, investors should consider management fees, as higher fees, such as Grayscale's 1.50%, can impact ETF returns. Investors are advised to target funds with annual management fees between 0.2% and 0.5%.

Comparison of platforms for investing in Spot Bitcoin ETFs

Steps to Invest in Spot Bitcoin ETFs

Investing in bitcoin ETFs requires an appropriate account, which can usually be opened quickly, often within 30 minutes, online.

• Open a brokerage account: Choose a provider that offers spot bitcoin ETFs and complete the online account opening process.
• Fund your account: Deposit funds from another brokerage account or a bank account to cover the cost of ETF shares, fees, and commissions.
• Research available bitcoin ETFs: Currently, there are 11 SEC-approved bitcoin ETFs. Look for ETFs with high trading volume, substantial assets under management (AUM), and assess the issuer's reputation and ETF composition.
• Select your preferred bitcoin ETFs: Compare fees and offerings from multiple brokerages to find an ETF that suits your financial plan and investment objectives.
• Place your order: Execute a buy order for your chosen bitcoin ETF, similar to buying stocks. Choose between a market order for immediate purchase or a limit order to buy at a specified price.
• Monitor your investments: Regularly review your investment performance, monitor bitcoin price trends, and stay informed about bitcoin-related news, as these factors can influence your spot bitcoin ETF's volatility.

Pros of Trading Spot Bitcoin ETFs

Trading spot bitcoin ETFs offers several advantages for investors:

• Convenience: Spot bitcoin ETFs trade on traditional exchanges, eliminating the need for investors to engage with cryptocurrency exchanges or manage wallet security and custody issues.
• Liquidity: These ETFs contribute to bitcoin's liquidity by providing a mechanism for easy trading. Issuers typically ensure liquidity by managing spreads effectively, facilitating smoother trading and attracting capital inflows.
• Regulatory oversight: Spot bitcoin ETFs operate under regulatory frameworks, offering investors a higher level of protection compared to unregulated crypto exchanges. Regulatory oversight can enhance investor confidence and mitigate risks associated with market manipulation and fraud.
• Tax implications: Tax treatment of bitcoin ETFs varies by jurisdiction but generally aligns with how other assets are taxed. Holding a spot bitcoin ETF for over a year may qualify for lower long-term capital gains tax rates, providing potential tax advantages compared to direct cryptocurrency investments, which often have different tax rules.

These benefits make spot bitcoin ETFs an attractive option for investors seeking regulated exposure to bitcoin with added convenience, liquidity, regulatory oversight, and potential tax benefits.

Cons of Trading Spot Bitcoin ETFs

Investing in spot bitcoin ETFs comes with inherent risks that investors should consider:

• Crypto volatility: The cryptocurrency market, including bitcoin, is known for its high volatility compared to traditional assets like U.S. equities. Price fluctuations driven by events such as the bitcoin halving, regulatory announcements, or market sentiment (FUD) can impact ETF values over short periods. For instance, on January 10, 2024, a fake tweet purportedly from the SEC caused a brief surge and subsequent drop in bitcoin prices, illustrating the market's sensitivity to news and speculation.
• Regulatory uncertainty: Despite being regulated investment vehicles, spot bitcoin ETFs remain subject to evolving regulatory landscapes. The SEC and other regulatory bodies may change their stance on cryptocurrencies, potentially affecting the legal and operational framework surrounding these ETFs. New regulations could impose restrictions or alter the investment landscape for bitcoin ETFs.
• Security risks: The custody of bitcoins underlying ETFs is managed by third-party custodians or exchanges. If these entities experience security breaches or operational failures, it could jeopardize the safety of investors' holdings. For instance, if a custodian like Coinbase, holding bitcoins for an ETF issuer like BlackRock, suffers a security breach, it could impact the ETF's bitcoin reserves and investor holdings.

These risks highlight the importance of thorough research and understanding of market dynamics, regulatory environments, and security measures when considering investments in spot bitcoin ETFs. Investors should weigh these factors alongside potential benefits to make informed decisions aligned with their risk tolerance and investment objectives.

Options besides Spot Bitcoin ETFs

For those looking to invest in bitcoin without opting for spot bitcoin ETFs, there are several alternative avenues to consider:

• Buy Bitcoin directly: Purchasing bitcoin directly is the most straightforward method to gain exposure to cryptocurrency. It provides ownership of bitcoin itself, offering flexibility in usage. However, direct ownership requires understanding how bitcoin works, selecting a custody method (like wallets), and choosing a reputable exchange for transactions. This approach gives more control over assets but also entails managing regulatory considerations.
• Invest in cryptocurrency company stocks: Investors can gain exposure to the cryptocurrency market by purchasing stocks of companies involved in cryptocurrencies. Companies like Riot Blockchain, Coinbase, and MicroStrategy are prominent examples. These stocks often correlate with cryptocurrency market movements and can offer potential returns based on company performance and market trends.
• Buy cryptocurrency company or index-based ETFs: Instead of spot bitcoin ETFs, investors can explore legacy ETFs that focus on cryptocurrency-related companies or broader market indexes. For example, the Grayscale Bitcoin Trust (GBTC) has been trading since 2013 and tracks bitcoin's performance. These ETFs typically have a longer track record and may appeal to investors seeking established products with proven performance in the cryptocurrency sector.

These alternatives provide varying degrees of exposure to bitcoin and the broader cryptocurrency market, each with its own considerations related to risk, regulation, and investment strategy. Investors should assess their goals, risk tolerance, and familiarity with cryptocurrency markets when choosing the most suitable investment approach.

What is Bitcoin?

Bitcoin is the original virtual, decentralized cryptocurrency traded via a peer-to-peer network. Transactions are recorded on the blockchain, a distributed ledger that enhances transparency and reduces reliance on intermediaries. Created by the pseudonymous Satoshi Nakamoto in January 2009, Bitcoin serves purposes ranging from payments to investment and speculation. Its smallest unit, the satoshi, equals 100 millionths of a bitcoin.

A spot bitcoin ETF directly invests in bitcoins as its underlying asset, distinguishing it from bitcoin futures ETFs that derive their value from derivative contracts. These ETFs hold physical bitcoins securely stored in a vault by the ETF provider.

Should you invest in a Spot Bitcoin ETF now?

Investing in a spot bitcoin ETF offers exposure to cryptocurrencies without the complexities of ownership and storage. Like any investment, the potential returns of bitcoin can vary, influenced by market sentiment and external factors. For those who see Bitcoin's long-term potential as a decentralized digital currency and store of value, current conditions may present a favorable buying opportunity considering its historical growth. However, caution is advised due to its volatility, which may unsettle risk-averse investors during short-term fluctuations.