The launch of the new spot Bitcoin (CRYPTO: BTC) ETFs in January has been heralded as one of the most important new product launches from Wall Street in nearly 30 years. The new ETFs make owning Bitcoin easier than it has ever been, opening up the prospect of cryptocurrency ownership for millions of Americans.
Given Bitcoin’s historical track record of delivering market-beating returns, individual investors could have a fantastic new tool for reaching their future wealth goals. But can investing in the new spot Bitcoin ETFs realistically put you on the path to millionaire status? Let’s find out.
Access to Bitcoin’s upside potential
Unlike most ETFs, which offer investors access to a diversified basket of stocks, the new spot Bitcoin ETFs hold just a single asset: Bitcoin. You can see for yourself — choose one of the new spot Bitcoin ETFs and click on “holdings,” and you’ll see that the fund has a 100% weighting on Bitcoin.
Theoretically, that means that you should be getting 1:1 exposure to the price movement of Bitcoin over time. If Bitcoin goes up 150% in a single year (as it did in 2023), then your Bitcoin ETF should also go up 150%.
Bitcoin / U.S. dollar chart by TradingView
And, indeed, that seems to be the case. Admittedly, it’s still a small sample size given that the new spot Bitcoin ETFs have only been trading for a few months, but they appear to be doing a fantastic job of tracking the price behavior of Bitcoin. Since early February, the price of Bitcoin is up approximately 49%. During that same time period, the iShares Bitcoin Trust (NASDAQ: IBIT) is up 49%. And the Fidelity Wise Origin Bitcoin Fund (NYSEMKT: FBTC) is up 49%.
All of this is important, because a growing number of Wall Street investors think that the price of Bitcoin is going to go absolutely parabolic between now and 2030. Cathie Wood of Ark Invest, for example, thinks that Bitcoin will hit a price tag of $1 million within the next few years. Given that Bitcoin is currently trading around $65,000, that implies a nearly 15x increase in value within an incredibly short period of time.
If all goes according to plan, then your shiny new spot Bitcoin ETF should go along for the ride. If Cathie Wood is right about the future price of Bitcoin, and if you are willing to put down a significant amount of cash today, then that money could be worth $1 million by 2030. It sounds too good to be true, but it just serves to highlight the type of absolutely heroic returns that Bitcoin is capable of delivering.
Time to reconsider ETFs?
As you can see from just some simple back-of-the-envelope calculations, these new spot Bitcoin ETFs are not your father’s ETFs. Add in the fact that there is an expanding array of different types of Bitcoin ETFs — such as leveraged ETFs that pay out a multiple of Bitcoin’s overall returns — and you can see that the new Bitcoin ETFs are much more of a “let’s create wealth” tool than a “let’s try to keep pace with the market” tool.
Image source: Getty Images.
Yet, despite the clear potential for future wealth formation, a lot of investors don’t like ETFs, and especially not the new Bitcoin ETFs. According to research from The Motley Fool, younger investors prefer to hold individual stocks and cryptocurrencies, and it’s not even close. And, in other research, The Motley Fool found that the launch of the new Bitcoin ETFs is having little to no impact on their decision to invest in Bitcoin. Once these investors hear the word “ETF,” they seem to tune out everything you have to say after that.
I think this is a mindset problem. When most younger investors think of ETFs, they are probably thinking of “boring” S&P 500 ETFs that hold a basket of 500 stocks. From their perspective, that investment can’t possibly be a millionaire-maker, because then everybody would be a millionaire. Instead, they’d rather hold a single stock in a hot, fast-growing industry — such as a sexy tech stock — and hope for the best.
Should you buy the new spot Bitcoin ETFs?
That’s why the new spot Bitcoin ETFs are so interesting. They are specifically designed to hold just a single asset. They aren’t investing in a basket of Bitcoin-related stocks, or Bitcoin-related cryptos. They are only holding Bitcoin. This would seem to make them a perfect match for what younger investors are looking for.
If you think that the price of Bitcoin is going to skyrocket over the next few years (admittedly a big “if”), then one of the best possible ways to get exposure to that millionaire-making potential could be investing in one of the new spot Bitcoin ETFs.
Before you buy stock in iShares Bitcoin Trust, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and iShares Bitcoin Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
See the 10 stocks
*Stock Advisor returns as of April 22, 2024
Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
