The approval of spot Bitcoin ETFs in early 2024 has dramatically changed the cryptocurrency industry, helping Bitcoin reach a new record high. With Bitcoin ETFs now available through online brokerage firms, including IRAs and retirement accounts, everyday investors can easily gain exposure to Bitcoin without needing to use separate cryptocurrency exchanges or Bitcoin wallets.
Spot Bitcoin ETFs directly track the price of Bitcoin, a new development in 2024. Before this, Bitcoin ETFs were based on Bitcoin futures contracts or other investments that correlated to the cryptocurrency’s price, but none directly invested in Bitcoin.
Where to Buy Spot Bitcoin ETFs
Spot Bitcoin ETFs are available at many online brokers, often with no trading commissions. Some of the platforms offering spot Bitcoin ETFs include:
- Charles Schwab
- Fidelity (including its own spot Bitcoin ETF, Fidelity Wise Origin Bitcoin Fund)
- E*Trade
- Robinhood
- Interactive Brokers
How to Buy Spot Bitcoin ETFs
To purchase Bitcoin ETFs, you’ll need to open a brokerage account if you don’t already have one. Here’s how to get started:
- Search for the ETF: Use the brokerage’s search tool or ETF screener to find the Bitcoin ETF by name or ticker symbol. If your broker offers multiple Bitcoin ETFs, compare them, paying close attention to the expense ratio, which ranges from 0.19% to 1.50%. This fee represents the annual cost of owning the ETF.
- Place your trade: Once your account is funded and you’ve selected the Bitcoin ETF, placing a trade is as simple as clicking the buy button. Double-check the number of shares and the ETF ticker before confirming the trade.
What Is a Bitcoin ETF?
A Bitcoin ETF works similarly to other ETFs. Like shipping containers that can hold various goods, ETFs can “hold” different types of investments and be traded on major retail brokerage platforms. Spot Bitcoin ETFs hold only Bitcoin, directly tracking its price.
While not as diversified as other ETFs that track indexes like the S&P 500, spot Bitcoin ETFs make it easier to add Bitcoin to your portfolio through traditional brokerage accounts, including retirement accounts like IRAs.
Bitcoin ETF Pros and Cons
Pros:
- Easy to buy: Many brokerage accounts already offer access to Bitcoin ETFs, unlike direct Bitcoin investments, which require setting up a crypto exchange account and potentially a Bitcoin wallet for storage.
- Simplified taxes: ETF trades are easier to manage for tax purposes, as they can be integrated with your overall trading activity.
Cons:
- Ongoing fees: Bitcoin ETFs come with ongoing fees, known as expense ratios, which are higher than those for stock index ETFs. Owning Bitcoin directly avoids these fees, though there are typically transaction fees when buying and selling.
- Loss of control: Owning a Bitcoin ETF means you don’t have direct control over the Bitcoin holdings, which goes against the decentralized nature of cryptocurrencies.
Other Ways to Invest in Bitcoin
Besides Bitcoin ETFs, here are other ways to invest in cryptocurrency:
- Buy Bitcoin directly: You can purchase Bitcoin itself and even use it for everyday transactions, though it’s important to be cautious with new investments.
- Invest in crypto-related stocks: If you’re not ready to buy cryptocurrency directly, you can invest in companies like Coinbase, which operate in the cryptocurrency space, providing indirect exposure.
Cryptocurrency is still relatively new, and while it offers exciting opportunities, investors should approach it with caution.
