A bitcoin ETF is a mutual fund that invests in bitcoin. Its popularity was initially fueled by the rise of the cryptocurrency market, which was considered a promising investment opportunity. In November last year, US interest rates started to increase, hammering speculative assets like bitcoin. The ETF tracked bitcoin’s 69 per cent decline, with the cost of maintaining futures contracts eating into its profits. Despite the rise in popularity, the SEC has yet to approve any Bitcoin ETF, and its future prospects are uncertain.
Not everyone wants to invest in a cryptocurrency exchange, and not everyone has the financial means to do so. For instance, not everyone can open an account with Coinbase. Many people also have brokerage accounts that do not allow them to invest in crypto assets. For these people, a Bitcoin ETF is a great alternative. An ETF lets you invest in Bitcoin without having to deal with the hassle of opening and maintaining a private wallet. And unlike an individual Bitcoin, a Bitcoin ETF can be traded on traditional exchanges, and has no hidden fees.
Although no ETF offers direct exposure to Bitcoin, there are a number of companies that utilize the technology. Harvest Portfolios, for example, has an ETF called Blockchain Technologies that tracks companies that are using Blockchain technology to operate. Companies that are included in the fund include Visa and Microsoft. This fund is available on the Toronto Stock Exchange. In addition, it is eligible for RRSPs and TFSAs. If you do not have access to the Toronto Stock Exchange, you can still invest in Bitcoin through companies that use Blockchain technology.
The cost of buying Bitcoin with an ETF depends on how much you want to buy and sell. This amount will be dependent on the spot price of Bitcoin and the value of futures contracts you purchased. Moreover, you have to consider the margin requirements, which can hinder the ETF’s ability to meet its investment objective.
Another advantage of investing in a Bitcoin ETF is that you do not need to have any knowledge about bitcoin to buy and sell. You do not even have to sign up with a cryptocurrency exchange. The ETF also eliminates the risk of losing your wallet password. This makes investing in a Bitcoin ETF a great option for a casual investor.
However, some regulators are concerned about the lack of regulation and transparency surrounding the Bitcoin market. In addition, the SEC has not approved any Bitcoin ETFs tied to the spot price. Currently, the SEC has approved only ETFs that provide exposure through Bitcoin futures. Unlike traditional stock market ETFs, bitcoin futures ETFs do not invest in Bitcoin directly, but instead speculate on its price.
As of late 2018, only two bitcoin ETFs are listed on the U.S. exchanges. There are also a number of bitcoin funds on the Canadian stock exchange, but these aren’t exactly ETFs. There is a lack of clarity around the BITI’s timing, but investors are awaiting the Federal Reserve’s next moves before committing to it.