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An ETF, or exchange-traded fund, is a collection of similar investments that people can buy. ETFs create a diversified portfolio without the investor having to choose from a multitude of stocks. Similarly, Bitcoin ETFs are collections of Bitcoin-related investments. If you want to get into crypto investing but think investing in Bitcoin or alt-coins is too risky – or don’t want to worry about finding the best places to store your crypto – invest in an ETF Bitcoin could be for you.
An article from Forbes points out that Bitcoin ETFs currently do not include Bitcoin, but instead hold Bitcoin futures contracts or stocks of companies related to Bitcoin and other cryptos. For example, a Bitcoin ETF may include the stock of a crypto exchange, the maker of cold wallets, or – more commonly in the case of the best Bitcoin ETFS – Bitcoin futures.
What are bitcoin futures?
Futures contracts represent a legal agreement to buy or sell a specific commodity at a predetermined price at a specific time. When you buy bitcoin futures, you agree to buy bitcoin. Keep in mind that when you trade futures, you are selling the commodity before it reaches you. You don’t have to worry about selecting a crypto exchange or buying a cold wallet for secure storage. You will not actually own Bitcoin.
The Securities and Exchange Commission will not allow ETFs to hold bitcoins or other cryptos because cryptos are traded on unregulated exchanges. Futures contracts, on the other hand, are regulated by the SEC. Many advanced investors are familiar with and comfortable with futures contracts, so these ETFs are growing rapidly as an alternative to Bitcoin trading.
Best Bitcoin ETFs
The SEC has currently approved six Bitcoin ETFs for trading, according to Forbes. Although we call them the best Bitcoin ETFs to buy in 2022, they are also the only ones available – at least, for now.
ProShares Bitcoin Strategy ETF
ProShares was the first Bitcoin ETF to hit the market, in October 2021. It grew by $1 billion in its first days. The ETF has fallen dramatically since its launch, in line with the crypto winter which saw Bitcoin lose 70% of its record value. The crypto dropped from $68,000 on November 10, 2021 to below $20,000 on August 31, 2022.
Similarly, Proshares (BITO) is down 70% since launch. You will find similar bearish numbers with all the ETFs on this list. The crypto winter could represent a time to buy. As investor and author Robert Kiyosaki tweeted at the start of the 2022 crypto crash, “Crashes are the best time to get rich.”
In addition to Bitcoin futures, the ProShares BITO ETF holds Treasury securities and cash, according to Forbes, which provides some diversity and a hedge against the crypto winter. The ETF is currently trading at just under $12 per share, which could provide the opportunity to take a position without a huge investment.
ProShares Short Bitcoin ETF
If you’re bearish about Bitcoin and think the current crypto winter is going to drag on forever, with no rebound in sight, you might want to consider ProShares Short Bitcoin ETF (BITI). Unlike the other ETFs on this list, the ProShares Short Bitcoin ETF speculates on a further drop in the price of Bitcoin. It was launched in June 2022, just before the crypto winter and started to climb. With some experts stating that the crypto winter could end by 2023 or 2024, there is still time to enter BITI.
Valkyrie Bitcoin Strategy ETF
Valkyrie almost exclusively trades Bitcoin futures and currently has $22 million in assets. Additionally, assets could consist of government securities, money market funds and corporate bonds. It does not deal with Bitcoin stocks or companies otherwise related to Bitcoin. For this reason, Valkyrie closely monitors Bitcoin’s value but, the company warns, “investors seeking direct exposure to Bitcoin’s price should consider another investment.”
Part of the Nasdaq Composite, Valkyrie is an actively managed ETF listed as “undiversified” under the Investment Companies Act of 1940. It holds a limited number of US Treasury bonds, but nearly 100% of its net assets are capitalized. in bitcoin futures. Valkyrie is trading at just $7.28 per share in early September. If you think the crypto winter will eventually pass, Valkyrie could be a solid investment to buy and hold.
VanEck Bitcoin Strategy ETF
Like Valkyrie, VanEck aims to hold most of its investments in Bitcoin futures, but may have assets invested in Treasuries and cash. VanEck differs from the other investments on this list because it is run as a C-Corp tax entity, rather than a registered investment company. This means that it does not have to distribute dividends to investors, which could lead to lower taxable distributions. VanEck also manages a number of other stock and futures-based ETFs, including VanEck Gaming, VanEck Environmental Services, VanEck Biotech, VanEck Video Gaming and eSports, and VanEck Digital Transformation. The company’s focus on emerging industries, sustainability and specialist exhibitions promises longevity. VanEck is one of several investment firms to have filed for a spot Bitcoin ETF, which would track the price of Bitcoin, rather than Bitcoin futures. The company’s innovative approach could make the VanEck Bitcoin Strategy ETF an attractive investment. It is currently trading at a 52-week low of $18.15, which is still higher than some of the other ETFs on this list.
AdvisorShares Managed Bitcoin Strategy ETF
AdvisorShares’ actively managed Bitcoin Strategy ETF (CRYP) invests primarily in Bitcoin futures, with government securities, cash, and even affiliated ETFs as part of its portfolio. Depending on the Bitcoin price, the fund can reduce or increase its exposure to Bitcoin futures from zero to 100%. It only manages $184,000 in assets and is the latest Bitcoin ETF to gain SEC approval. It hit the market in April 2022. Actively managed by Mark Yusko, CEO and Chief Investment Officer of Morgan Creek Capital Management, the fund reduces much of the risk associated with Bitcoin futures, as well as the investment challenges associated with the bitcoin trading.
Global X Blockchain ETF and Bitcoin Strategy
Global X combines Bitcoin futures and blockchain stocks to create a more diversified portfolio than most other ETFs on this list. Specifically, Global X owns shares of the Global X Blockchain ETF, which focuses on blockchain development companies, crypto exchanges, and digital mining companies. In August 2022, the company split its $10 million in assets with 44% in Bitcoin futures and 56% in the Global X Blockchain ETF.
Global X’s experience with global exposure across multiple sectors could make the ETF an attractive investment. It is currently trading near its 52-week low, leaving plenty of room for growth.
Bitcoin ETFs allow you to take advantage of a high-risk – and potentially high-return – asset without actively managing your portfolio. A Bitcoin ETF could be the right choice if you don’t want to mess with the technology behind Bitcoin trading and prefer a regulated investment.
You should speak to a financial advisor who can offer you the advice you need and help you add Bitcoin ETFs to your portfolio or open an investment account.
- Which Bitcoin ETF is the best?
- During a crypto winter, your best Bitcoin ETF investment might be ProShares Short Bitcoin, BITI. However, any of the Bitcoin ETFs on these lists could provide a solid return on investment once the crypto market rebounds. Think of prices right now as a sale.
- Are Bitcoin ETFs a good investment?
- Bitcoin ETFs typically represent Bitcoin futures or companies with holdings in crypto. When you invest in futures, you are speculating on the future price of an investment, whether it is grain, oil, or in this case, crypto. Futures and ETFs are regulated by the SEC, while Bitcoin trading is not. Some investors may think this makes Bitcoin ETFs a safer investment.
- Is it better to buy Bitcoin or Bitcoin ETFs?
- No investment is “better” than the other, per se. If you plan to use Bitcoin for purchases, or like the idea of deregulated finance, you might want to hold Bitcoin. But if you’re more interested in diversifying your portfolio and taking advantage of another potential crypto bull market, and don’t necessarily want to trade cryptos, a Bitcoin ETF is a good place to start.
Information is accurate as of September 8, 2022.
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