Exploring Bitcoin ETFs in a Volatile Market
Investing in Bitcoin can be risky due to limited real-world applications and price fluctuations. However, it is gaining traction among investors and financial institutions, which are increasingly embracing cryptocurrencies. The introduction of spot Bitcoin exchange-traded funds (ETFs) last year is a prime example of this trend.
For those optimistic about Bitcoin’s future, two ETFs stand out as solid options for investing $100 now.
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1. iShares Bitcoin Trust
The iShares Bitcoin Trust (NASDAQ: IBIT) emerged as one of the first Bitcoin ETFs and has quickly gained popularity. After about a year since its launch, this ETF boasts around $56 billion in assets.
This substantial size indicates high trading volume, which allows for easy buying and selling of shares and may reduce transaction costs. Backed by BlackRock, a well-known investment firm, alongside Coinbase, a leading cryptocurrency exchange, this ETF is positioned strongly in the market.
Notably, billionaire investor Israel Englander of Millennium Management expanded his stake in the iShares Bitcoin Trust, adding 12.6 million shares last year, ultimately reaching a total of 23.5 million shares.
Regarding costs, the iShares Bitcoin Trust has an expense ratio of just 0.25%. This translates to an annual fee of $2.50 for every $1,000 invested, making it a competitive option in the market.
2. Grayscale Bitcoin Mini Trust ETF
The Grayscale Bitcoin Mini Trust ETF (NYSEMKT: BTC) is another strong candidate for Bitcoin enthusiasts. The “mini” designation comes from its origins as a smaller ETF derived from one of Grayscale’s larger Bitcoin products, with 10% of the larger ETF’s holdings allocated to this new one.
This ETF stands out for its low fee structure, charging only 0.15%, or $1.50 per $1,000 invested. This is significantly lower than the original Grayscale Bitcoin Trust, which has a management fee of 1.5%.
Low fees are crucial for investors as they can enhance overall returns. For instance, if you invested $2,000 in the Grayscale Bitcoin Mini Trust ETF and Bitcoin’s price rose by 10% over the year, you would save about $30 in annual fees compared to the traditional Grayscale Bitcoin Trust.
Factors to Consider Before Buying a Bitcoin ETF
Bitcoin’s value has increased by about 100% over the past year (as of this writing), attracting many new investors to cryptocurrency. However, it’s essential to remember that Bitcoin’s value can be volatile. Recently, the price dropped nearly 13% from mid-December to early January.
Even with a modest $100 investment, one must approach cryptocurrency with caution. It requires tolerance for significant price fluctuations, along with the ability to keep a cool head during downturns. For those who prefer stability, an S&P 500 index fund might provide a simpler investment avenue.
Should you consider investing $1,000 in iShares Bitcoin Trust now?
Before purchasing shares of the iShares Bitcoin Trust, take the following into account:
The Motley Fool Stock Advisor analyst team has recently highlighted other stocks they believe are currently better investments — with iShares Bitcoin Trust not making the list. The selected stocks are expected to generate impressive returns in the years ahead.
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Chris Neiger has no stake in the stocks mentioned. The Motley Fool holds positions in and recommends Coinbase Global. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
