- Bitcoin ETFs allow investors to gain exposure to Bitcoin without owning it directly; they track Bitcoin’s price and are traded on stock exchanges
- Bitcoin ETFs differ from stocks in that they offer diversification across assets rather than ownership in a company, and specifically track Bitcoin’s price
- Investors can buy SEC-approved Bitcoin ETFs on brokerages like Fidelity and Robinhood, but should be aware of risks like volatility and potential security breaches
Exchange-traded funds (ETFs) have exploded in popularity in recent years as an easy way for investors to gain exposure to different assets and sectors. With the SEC‘s approval of the first spot Bitcoin ETFs in 2023, a new crypto investment option has emerged. But how exactly do you go about buying a Bitcoin ETF? This guide will walk you through everything you need to know.
What is a Bitcoin ETF?
A Bitcoin ETF is an exchange-traded fund that tracks the price of Bitcoin. It allows investors to gain exposure to Bitcoin without having to purchase and store the cryptocurrency directly. Much like gold ETFs, Bitcoin ETFs provide an easy way for mainstream investors to invest in the digital asset.
Bitcoin ETFs vs. Stocks
While similar in some ways, Bitcoin ETFs differ from traditional stocks:
- Stocks represent ownership shares in individual companies, while ETFs track an underlying asset or index
- ETFs offer diversification across many assets, unlike stocks which are a bet on one company
- Bitcoin ETFs specifically track the price of Bitcoin, giving investors exposure without direct ownership
Where to Buy a Bitcoin ETF
To invest in a Bitcoin ETF, you’ll first need to open a brokerage account with a platform that offers them, such as:
- Charles Schwab
- Interactive Brokers
Many top ETF issuers like BlackRock, Grayscale, and ARK Invest have launched Bitcoin ETFs that are now available across multiple brokerages. You simply fund your account and buy the ETF just as you would a stock.
Risks to Consider
While Bitcoin ETFs offer an accessible way to invest in crypto, risks remain:
- Bitcoin’s extreme volatility could lead to big price swings
- Cryptocurrency exchanges and networks remain vulnerable to security breaches
- Network forks can lead to competing and confusing Bitcoin versions
Regulators also continue to warn investors about crypto’s risks. While easier to invest in than Bitcoin itself, Bitcoin ETFs should still be approached with caution.
In the past, crypto investors needed to deal with complicated exchanges and wallets to gain Bitcoin exposure. With the arrival of SEC-approved Bitcoin ETFs, mainstream investors now have an easier path to participating in this emerging asset class. By understanding how Bitcoin ETFs work and where to buy them, anyone can now add crypto to their portfolio.