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Still Waiting To Buy Bitcoin? An Easier Way Is Almost Here

Want to buy Bitcoin, but you’re not up for opening a new trading account or dealing with a digital wallet? A new Bitcoin ETF might soon be your answer.




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A new Bitcoin-related ETF is expected to start trading today: ProShares Bitcoin Strategy ETF, under the symbol BITO. The ETF, seen charging 0.95% annually, ends an eight-year wait for a Bitcoin ETF. It will own next-month Bitcoin futures contracts, giving investors exposure to price changes. Until now, investors bought Bitcoin directly using a broker with cryptocurrency trading capability. Or they’ve used a $37 billion-in-assets closed end fund, Grayscale Bitcoin Trust (GBTC), which charges 2% annually.

So for people looking to get into the cryptocurrency craze from their existing brokerage account, ProShares Bitcoin Strategy is soon the leading game in town. “This week, the first of likely many Bitcoin futures-based ETFs could begin trading and be quite popular,” said Todd Rosenbluth, head of mutual fund and ETF research at CFRA.

Why Buy A Bitcoin ETF?

Massive run-ups in cryptocurrency values this year have made Bitcoin one of the top “fear of missing out” trades.

Two of the top performing ETFs this year are cryptocurrency related, says Morningstar Direct. Grayscale Ethereum Classic Trust (ETCG), which tracks the price of the Ethereum digital currency, is up more than 300% this year. Even ETFs tangentially involved in cryptocurrencies are up big. The Amplify Transformational Data Sharing ETF (BLOK) is up nearly 50% this year.

And owning Bitcoin directly is even more powerful. Just this year, the price of Bitcoin is up more than 430% to north of $61,000, says Coinbase. Meanwhile, the price of Ethereum is up nearly 900% this year.

Buying a Bitcoin ETF lets investors add exposure in a simple move in their existing portfolios. Such simplicity will “bring cryptocurrency investment to the masses,” said Sarah Manski, assistant professor at George Mason University.

But Wait! There’s More Bitcoin ETFs Coming

Rosenbluth thinks the ProShares Bitcoin Strategy will likely gain inflows. Scarcity is working in its favor. But there’s plenty more where that came from.

No fewer than nine additional futures-based ETFs are likely on the way, he says. Fund families ranging from ARK Invest to Invesco (IVZ) and VanEck not to mention Bitwise and Valkerie are prepping their own versions. With so many Bitcoin ETFs on the way, investors will likely benefit from falling fees, he says. Additionally, GrayScale is looking to convert its closed-end fund into an ETF.

All these ETFs aim to use the same strategy. They don’t own Bitcoin directly, but rather, futures on the Bitcoin cryptocurrency. This is the source of the underlying cost. But it’s also the way they’re getting past regulators’ objections to them. The Securities and Exchange Commission has banned a straight Bitcoin ETF for eight years. There’s a fear the price of Bitcoin might be manipulated as it trades on lightly regulated marketplaces. But Bitcoin futures, on the other hand, are supervised by the Commodity Futures Trading Commission.

“We previously expected such concerns would extend to a futures-based product and anticipated they would take more time before giving the green light to any Bitcoin ETF,” Rosenbluth said.

Bitcoin ETFs To Make A Splash

A new option to easily buy Bitcoin may rattle the whole process.

Some investors investing in the cryptocurrency through tangential ETFs now have a more direct option. Rosenbluth thinks the $1.3 billion-in-assets Amplify Transformational Data Sharing ETF, which invests in blockchain companies or firms that own Bitcoin, might see outflows. Blockchain is the underlying technology that powers many cryptocurrencies like Bitcoin.

But above all, a Bitcoin ETF allows investors to allocate at least a sliver of their portfolios into Bitcoin. With bond allocations generating such low returns, some investors might look to Bitcoin for more mojo.

“Many investors still adhere to the 40% bond allocation in their portfolios, but with bond interest rates continually marching lower, investors will find it increasingly difficult to generate the returns needed for their retirement or future liabilities,” Rosenbluth said.

Cryptocurrencies Are Rocking

Crypto YTD price ch. % Market value ($ billions)
Bitcoin 436.11% $1,200
Ethereum 887.04% 441.7
Ethereum 2 887.04% 441.7
Binance Coin 1470.10% 80.4
Cardano 1885.23% 70.3
 Source: Coinbase
Follow Matt Krantz on Twitter @mattkrantz

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