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- Following the SEC's approval, bitcoin ETFs are now available on traditional market exchanges.
- Unlike bitcoin futures ETFs, bitcoin ETFs directly hold bitcoin assets, so investors can more easily gain crypto exposure.
- Soon, investors can buy bitcoin ETFs from popular brokerages like Fidelity.
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The US Securities and Exchange Commission just greenlit spot bitcoin ETFs. So far it has approved bitcoin ETF proposals as part of its initial announcement. Approved applicants for bitcoin ETFs include Grayscale, Bitwise, BlackRock, Fidelity, Hashdex, BZX, VanExk, WisdomTree, and Franklin.
Applications for bitcoin ETFs first popped up in 2013, but had been repeatedly rejected by the SEC up until now.
Trading can begin as early as tomorrow, January 11, 2024, with over a dozen bitcoin ETF applicants — including Fidelity, BlackRock, Grayscale, Ark Investments, and 21Shares — eager to launch new products.
"We've fought with the SEC for ages, and they have been really slow in accepting the cryptocurrency market," says Stuart John Barton, CFP and co-founder of Volatility Shares. "The SEC has lost enough battles and is now realizing they may have been leaning too conservative and need to loosen up. The SEC should be working with the investment community to improve products and make them better, not just stand in the way of innovation."
Here's what you need to know about bitcoin ETFs.
What are Bitcoin ETFs?
A bitcoin ETF, not to be confused with a bitcoin futures ETF, is an exchange-traded fund that can directly hold bitcoin among other investable securities. Unlike bitcoin itself, which can only be bought and sold along the blockchain, bitcoin ETFs can be traded by retail investors through regular brokerage accounts.
"It opens the crypto market up to a broader world. Over time, we're likely to see a maturing market with more people trading and buying bitcoin," says Barton, "In a more general sense, it just simplifies the process as most Americans have brokerage accounts. That means pretty much everybody has access to bitcoin ETFs."
Although bitcoin futures ETFs were first introduced on the NYSE back in 2021, investors still haven't been able to invest directly in bitcoin through an ETF until today. But with bitcoin ETFs, people can more easily mitigate risk, simplify the investing process, and increase overall portfolio diversification.
A bitcoin ETF doesn't have to just hold bitcoin, either. Just like any other exchange-traded fund, bitcoin ETFs can be a combination of crypto, stocks, bonds, and other commodities. Bitcoin ETFs, therefore, provide an easy way for investors to diversify their portfolios further.
Advantages of bitcoin ETFs
The launch of bitcoin ETFs could change the game of crypto trading by granting retail investors a more accessible means of exposure to the crypto world. Plus, ETFs are one of the most affordable ways to decrease volatility through portfolio diversification.
Investing in bitcoin through an ETF is now the simplest, least-risky way to get exposure to the crypto market. Cryptocurrencies are notoriously volatile, and the market, in general, has been riddled with fraudulent activity and scams. However, more investors can get involved in the cryptocurrency market by being regulated by the SEC and trading on the traditional exchange.
That said, it's important to note that investing in cryptocurrencies like bitcoin (even through an ETF) is still risky. Making bitcoin accessible through an ETF won't eliminate its hyper-volatile nature. So, only investors with a high-risk tolerance should invest in bitcoin ETFs.
Barton theorizes how the bitcoin ETF may impact how bitcoin is traded down the line. "Bitcoin ETFs are more investment-based than bitcoin futures ETFs are. I believe bitcoin ETFs will be more aimed at people who will put money in and leave it in there for a few years. If that's the case, we might actually see a reduction in the volatility of the bitcoin itself."
Where to invest in bitcoin ETFs
Like most regulated securities on the market, you can invest in bitcoin ETFs through some of the best online brokerages and investment platforms. Dozens of platforms have already submitted applications to the SEC to begin trading bitcoin ETFs, and 11 have been approved so far, including Grayscale, Bitwise, BlackRock, Fidelity, Hashdex, BZX, VanExk, WisdomTree, and Franklin.
Fidelity, one of the most popular brokerages out there, has already posted several of its proposed bitcoin ETFs on its site. There are sure to be quite a few more brokers and popular cryptocurrency exchanges jumping on the opportunity to offer bitcoin ETFs to their users in the next few weeks.
If you're interested in investing in cryptocurrencies but don't know where to start, you can always consult with a financial advisor with crypto trading experience for professional insight.
Investing and Retirement Reporter
Tessa Campbell is an investing and retirement reporter on Business Insider’s personal finance desk. Over two years of personal finance reporting, Tessa has built expertise on a range of financial topics, from the best credit cards to the best retirement savings accounts.ExperienceTessa currently reports on all things investing — deep-diving into complex financial topics, shedding light on lesser-known investment avenues, and uncovering ways readers can work the system to their advantage.As a personal finance expert in her 20s, Tessa is acutely aware of the impacts time and uncertainty have on your investment decisions. While she curates Business Insider’s guide on the best investment apps, she believes that your financial portfolio does not have to be perfect, it just has to exist. A small investment is better than nothing, and the mistakes you make along the way are a necessary part of the learning process.Expertise:Tessa’s expertise includes:
- Credit cards
- Investing apps
- Retirement savings
- Cryptocurrency
- The stock market
- Retail investing
Education:Tessa graduated from Susquehanna University with a creative writing degree and a psychology minor.When she’s not digging into a financial topic, you’ll find Tessa waist-deep in her second cup of coffee. She currently drinks Kitty Town coffee, which blends her love of coffee with her love for her two cats: Keekee and Dumpling. It was a targeted advertisem*nt, and it worked.
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