With Bitcoin being the best-performing asset of the year more often than not during the last 15 years, many investors want to gain exposure but doing so can be tricky.
For retail and institutional investors alike, questions of regulatory and tax compliance can be puzzling. Then, there’s the challenge of learning to navigate a new ecosystem. Using exchanges, sending transactions, and taking custody of coins can take significant time to learn.
Fortunately, there are ways to gain exposure to Bitcoin without purchasing and holding the asset itself. This can be done in a standard brokerage or retirement account.
This article will explore the avenues available for tapping into the Bitcoin market in this way, including exchange-traded Funds (ETFs), public companies with Bitcoin holdings, and mining companies.
Bitcoin ETFs: A Gateway to Cryptocurrency Markets
ETFs in general have become a popular vehicle for investors looking to diversify their portfolios without directly purchasing the underlying assets. Spot Bitcoin ETFsoffer a straightforward way to invest in Bitcoin through a regulated framework, and have been very successful since their initial launch in the US on January 10, 2024. The first gold ETF took 2 years to reach $10 billion in AUM. Blackrock’s IBIT accomplished the same in just 2 months.
Investors track the price of Bitcoin and trade on traditional stock exchanges, providing liquidity and accessibility to investors who may not otherwise be able to access cryptocurrencymarkets or don’t want to hold Bitcoin itself. Some of the most dominant spot ETFs in the US include BlackRock’s IBIT, Fidelity’s FBTC, and ARK’s 21 Bitcoin Shares.
Here are some important things to think about when it comes to selecting a spot Bitcoin ETF:
- Custodian: How does the issuer store their coins? All the ETFs use Coinbaseas their custodians, with a few exceptions:
- Fidelity secures their own Bitcoin internally,
- VanEck uses BitGo rather than Coinbase,
- Hashdex selected BitGo as its custodian.
- Fees: What expense ratio does the fund charge? BitWise has garnered attention for having the lowest fee at just twenty basis points. On the other end of the spectrum, Grayscale charges 1.5%.
- Transparency: How much do you value transparency when it comes to your funds’ holdings? So far, BitWise is the only fund that has published the public key to its wallet, allowing anyone to view the blockchain transactions that prove the fund holds what it claims to.
Fidelitystands out, as being a veteran in the digital asset space that allows them to self-custody their Bitcoin holdings. BitWise shines for its low fees and transparency. Some investors see these funds as preferable. Others may opt for the reputation of firms like BlackRock or ARK.
Public Companies with Bitcoin Holdings: Investing in Corporate Believers
A number of forward-thinking public companies have added Bitcoin to their balance sheets, recognizing its potential as a store of value. By investing in these companies, investors indirectly gain exposure to Bitcoin's price movements. This approach allows investors to benefit from the company's broader business performance while aligning with their innovative stance on Bitcoin.
MicroStrategy (MSTR) was the first and still is the most well-known company to adopt a Bitcoin treasury strategy. The company currently holds over 1% of the entire supply of BTC. Shares of MSTR have also seen impressive appreciation in recent years, even outperforming Bitcoin at times.
Here is a partial list of other companies that have decided to put Bitcoin on their balance sheets:
- Coinbase
- Galaxy Digital Holdings
- Marathon Digital Holdings
- Block
- Tesla
In addition to companies that hold Bitcoin, mining stocks can also provide BTC exposure.
CRYPTO MARKET COULD DOUBLE TO $5 TRILLION: RIPPLE CEORipple CEO Brad Garlinghouse predicts the crypto market could surge to $5 trillion by year-end, fueled by U.S. approval of spot Bitcoin ETFs and an upcoming mining-reward halving. His optimism is based on the entrance of… pic.twitter.com/gFUv1rIgi8
— Crypto Town Hall (@Crypto_TownHall) April 11, 2024
Mining Companies: The Backbone of Bitcoin's Infrastructure
Bitcoin mining companies are at the heart of creating new Bitcoin and securing the network. Investing in these companies represents an investment in the infrastructure of the Bitcoin network. As the demand for Bitcoin grows, these companies may see increased profitability, making them an attractive option for investors looking to get involved in the cryptocurrency space.
The recent rise in Bitcoin’s price has been accompanied by an increase in the network’s hash rate, as miners can create profitable operations with greater ease.
Many mining companies hold some of the Bitcoin they mine on their balance sheets, making them a way to gain exposure to both Bitcoin and its infrastructure. A few popular Bitcoin mining stocks in 2024 include:
- Hut8
- Riot Blockchain
- Hive Blockchain
- Bitfarms Limited
- Cipher Mining
- CleanSpark
CRYPTO BREAKING NEWSThe Bitcoin ETFs Help Money Flow Into Smaller Projects And Their ICOs. Bitcoin (BTC) ETFs have become a gateway for traditional investors to enter the crypto space, resulting in a substantial influx of capital that is... check us out @… pic.twitter.com/crjqUU7gh2
— InnovatekMobile (@Neome_com) April 7, 2024
Strategic Considerations for Bitcoin Exposure
Each of these securities has benefits and drawbacks. For example, mining stocks can be very volatile, even more so than Bitcoin. Yet they can outperform Bitcoin by a significant margin at times. Such securities require the highest risk tolerance and greatest conviction in the promise of Bitcoin. They can be thought of as a speculative play on Bitcoin, which may be too speculative for some.
Public companies that hold Bitcoin provide a blend of exposure to the company’s operations and their Bitcoin holdings. In general, the larger the Bitcoin holdings, the more the share price tends to be correlated to the Bitcoin price. These can be a great choice for more traditional investors who feel safer holding equities with earnings, cashflows, dividends, etc. The downside is they may underperform the other securities available.
Bitcoin ETFs represent the purest Bitcoin exposure that a brokerage account can have. There’s not much to be said here, as these shares represent ownership of a portion of the fund’s BTC holdings. There has even been talk of ETFs eventually allowing shares to be redeemed for spot Bitcoin, although this is unlikely in the USA, as the SEC has required ETFs to be settled in cash only. The drawback is that each ETF issuer charges fees, which can eat into profits over time.
When considering exposure to Bitcoin through your brokerage account, it's important to evaluate your investment goals and risk tolerance. Bitcoin and related investments can be volatile, and a strategic approach should involve due diligence and a clear understanding of the underlying market dynamics.
This article was written by Brian Nibley at www.financemagnates.com.
You can get bonuses upto $100 FREE BONUS when you:
💰 Install these recommended apps:
💲 SocialGood - 100% Crypto Back on Everyday Shopping
💲 xPortal - The DeFi For The Next Billion
💲 CryptoTab Browser - Lightweight, fast, and ready to mine!
💰 Register on these recommended exchanges:
🟡 Binance🟡 Bitfinex🟡 Bitmart🟡 Bittrex🟡 Bitget
🟡 CoinEx🟡 Crypto.com🟡 Gate.io🟡 Huobi🟡 Kucoin.
Comments