As anticipated, the U.S. Securities and Exchange Commission (SEC) has approved 11 exchange-traded funds (ETF) for Bitcoin, providing a low-cost way to take a position in the popular digital currency.
The ETFs hold a certain amount of Bitcoin and the price of the ETFs will go up and down with changes in the price of Bitcoin, similar to a gold ETF or one made up of equities. Investors can buy the ETFs as they would any stock, through a broker or online trading platform.
Since these 11 new ETFs are likely to draw new investors to Bitcoin, we turned to some experts to explain the potential risks and benefits and how they might be different from investing in traditional stocks.
Investing or speculating?
Dr. Robert Johnson, professor of finance at Creighton University’s Heider College of Business, says any investor should understand their goal. Are they investing or merely speculating?
“My belief is that one cannot truly invest in cryptocurrencies, one can only speculate,” Johnson told us. “The crypto market has never been a good place to invest. At times it has been a very profitable place for some to speculate.”
But Henry Robinson, founder of Decimal Digital Group, believes the approval of the Bitcoin ETFs is a truly watershed moment, one that will transform the industry.
“Their launch will bring new investment into Bitcoin from pensions, endowments, insurance companies, sovereign wealth, retirement plans, trusts, and many more,” Robinson told ConsumerAffairs.
But he says that while the ETF launches are exciting, he thinks people would be better off buying and holding actual Bitcoins.
Alan Mittleman, chief operating officer at Secure Digital Markets, says the new ETF should be carefully analyzed before investing, specifically considering the size and liquidity of the funds.
“As these instruments track the underlying very closely, one wants to make sure that when entering and exiting transactions, they limit the amount of bid/offer they pay,” Mittleman said. “As such, the more liquid the ETF, the less transaction costs incurred.”
How risky?
But what about risk? Are Bitcoin ETFs any riskier than a stock ETF?
“Unequivocally yes,” Johnson says. “Equity ETFs invest in companies that produce something -- companies that have cash flows. Cryptocurrencies don't produce anything.”
But Mittleman says all ETFs are highly regulated by the appropriate governing bodies, and underlying assets are required to be held by qualified custodians.
Even so, in his statement announcing the new ETFs, SEC Chair Gary Gensler made it clear the agency is neutral, if not a bit skeptical of the asset.
“While we approved the listing and trading of certain spot bitcoin ETP shares today, we did not approve or endorse Bitcoin,” Gensler said. “Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”
Here are nine of the new Bitcoin ETFs that began trading Thursday and their stock symbols:
| Grayscale Bitcoin ETF | GBTC |
| Invesco Galaxy Bitcoin ETF | BTCO |
| Wisdomtree Bitcoin ETF | BTCW |
| Valkyrie Bitcoin Fund | BRRR |
| Ishares Bitcoin Trust | IBIT |
| Fidelity Wise Origin Bitcoin Fund | FBTC |
| Ark 21Shares Bitcoin ETF | ARKB |
| Bitwise Bitcoin ETF | BITB |
| Hashdex Bitcoin Futures ETF | DEFI |
Photo Credit: Consumer Affairs News Department Images
Posted: 2024-01-12 12:10:29
