Welcome back to Bitcoin Basics. Today’s article is all about Bitcoin ETFs; from what they are, to why you may find more value in buying an ETF vs actual Bitcoin. All in less than 2 minutes.
If you prefer to watch a video, the article is summarized below in a YouTube video posted to the Bitcoin Basics YouTube channel.
An exchange-traded fund, or ETF for short, is a type of investment security that’s tied to an underlying asset, like a commodity, index fund, bond, or basket of assets. In this case, a bitcoin ETF aims to track the price of bitcoin by purchasing and holding a lot of Bitcoin.
ETFs have become massively popular over the last decade as they provide easy, liquid access to diversified investments. Bitcoin ETFs have recently emerged in 2024 to give mainstream investors exposure to digital assets via traditional brokerage accounts.
Now that we’ve covered some basics, let’s drive home the perks of buying Bitcoin using an ETF in five simple points:
- ETFs trade just like stocks, on regulated exchanges you already have an account with. It is simple to place orders online in minutes, with no new complicated crypto-specific onboarding to manage.
- Reputable ETF providers securely custody bitcoin using industry best practices — mitigating hacking risk and chance of loss for common investor mistakes.
- While it currently costs over $40,000 to buy 1 Bitcoin, you can buy a single share of a Bitcoin ETF for $30. They are a great way to test the waters before jumping into Bitcoin ownership.
- ETF providers offer lower fees for holding the ETF than major crypto exchanges. The Blackrock Bitcoin ETF for example has a 0.25% annual fee, which beats the ~1% transaction fees, trading spreads, and network charges, charged by a Bitcoin Exchange.
- ETFs can be purchased in tax-advantaged accounts like a Roth IRA or 401(k) which shelter funds from capital gains taxes when holdings grow, magnifying the long-term compounding growth.
