With the recent approval of the inaugural spot Bitcoin (CRYPTO: BTC) ETFs, the landscape of cryptocurrency investments has taken an intriguing turn. While these new ETFs may not trigger an immediate surge in Bitcoin prices, they are poised to democratize crypto access for the average investor.
Despite the allure, investing in a new Bitcoin ETF demands thoughtful consideration. Here are three crucial aspects to bear in mind.
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Bitcoin ETF Fees
The Securities and Exchange Commission (SEC) has greenlit 11 distinct spot Bitcoin ETFs, and more may follow suit. In this competitive arena, issuers are expected to roll out extensive marketing campaigns, emphasizing low fees as a key attraction. The aim is rapid asset accumulation, and the race to offer the most competitive fees is on. Notably, BlackRock (NYSE: BLK), through its iShares Bitcoin Trust ETF, boasts a leading edge with a meager 0.25% annual fee.
Opting for the lowest fee may seem straightforward, but some ETFs are already pledging fee waivers and discounts to entice new investors. Beware of seemingly too-good-to-be-true fees, as they may escalate post-promotional periods, leading to potential regrets.
Bitcoin ETF Performance
Tracking error, a significant risk in ETF investments, hinges on the variance between the performance of the underlying asset (Bitcoin) and the ETF itself. While the initial batch of Bitcoin ETFs experienced tracking errors due to reliance on financial derivatives, the new ones aim to mitigate this by directly holding spot Bitcoin.
Nevertheless, closely monitor the initial performance of these ETFs. Achieving a precise 1:1 match in performance may prove trickier than anticipated, given Bitcoin‘s inherent volatility.
Spot Bitcoin vs. Spot Bitcoin ETF
The decision between acquiring Bitcoin directly through a cryptocurrency exchange or indirectly via an ETF introduces a conundrum. While Bitcoin ETFs theoretically offer a cheaper and more convenient option, veteran crypto investors may prefer the autonomy of directly purchasing Bitcoin from platforms like Coinbase Global (NASDAQ: COIN) or decentralized exchanges, thereby maintaining control over cryptographic keys.
Will Bitcoin Go Mainstream?
The advent of Bitcoin ETFs is set to make Bitcoin accessible to a broader demographic, eliminating the need for intricate processes associated with crypto purchases. Yet, individual investors are not obligated to heed Wall Street’s call to embrace these ETFs. Alternatives, such as directly purchasing Bitcoin, remain viable choices.
In conclusion, the new Bitcoin ETFs hold promise for individual investors, but exercising discernment is crucial. Despite the pressure from financial giants, investors can explore various options, including direct Bitcoin acquisition, before making a choice.
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“This data underscores considerably stronger profitability in the mining sector compared to challenges experienced in 2022 and part of 2023.”
In approximately six months, Bitcoin undergo a “halving,” reducing the new bitcoins awarded to miners by half. Satoshi Nakamoto introduced this event in 2009 as an anti-inflationary measure. Occurring roughly every four years, the lead-up to halvings traditionally proves the most profitable time for crypto investors. “Buying bitcoin six months before a halving and selling 18 months after has historically outperformed a ‘buy and hold’ strategy,” affirms the analyst.
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