Bitcoin is the most popular and valuable cryptocurrency in the world. It is estimated to have a market capitalization of over $1 trillion as of January 2024. However, for those looking for a quick buck, investing in Bitcoin can be challenging and risky, especially if you are not familiar with the technical aspects of crypto or the regulatory hurdles involved.
That’s why the approval of spot Bitcoin ETFs by the US Securities and Exchange Commission (SEC) in late 2023 was a game-changer for the crypto industry.
In this article, I will explain:
1. What spot Bitcoin ETFs are and how they work.
2. Why they are important for the crypto market.
3. How to invest in them in 2024.
4. The best spot Bitcoin ETFs to watch for in 2024.
Let’s get started!
What Are Spot Bitcoin ETFs And How Do They Work?
A spot Bitcoin ETF is a type of exchange-traded fund that holds Bitcoin as its underlying asset and tracks its price movements. Unlike other types of Bitcoin ETFs that use derivatives or synthetic instruments to mimic the price of Bitcoin, a spot Bitcoin ETF directly buys and sells Bitcoin on the spot market.
A spot Bitcoin ETF works like any other ETF. It is listed on a stock exchange and can be bought and sold by investors through a brokerage account. Each share of a spot Bitcoin ETF represents a fraction of a Bitcoin, and the price of the share reflects the price of Bitcoin at any given time.
The spot Bitcoin ETF also has a net asset value (NAV), which is the total value of the Bitcoin it holds divided by the number of shares outstanding.
Additionally, a spot Bitcoin ETF has several advantages over other ways of investing in Bitcoin, such as buying Bitcoin directly from an exchange or a wallet, or buying a Bitcoin futures or options contract.
Some of The Advantages of Spot Bitcoin Are:
Accessibility: A spot Bitcoin ETF can be accessed by any investor who has a brokerage account, regardless of their location, experience, or knowledge of crypto. A spot Bitcoin ETF does not require the investor to deal with the technical complexities of setting up a crypto wallet, verifying their identity, or transferring funds to and from an exchange.
A spot Bitcoin ETF also eliminates the need for the investor to worry about the security and custody of their Bitcoin, as the ETF provider takes care of that.
Liquidity: A spot Bitcoin ETF has a high level of liquidity, which means that it can be easily bought and sold at any time, without affecting the price of Bitcoin significantly. A spot Bitcoin ETF also has a lower bid-ask spread, which is the difference between the price at which an investor can buy and sell a share of the ETF.
A lower bid-ask spread means that the investor can execute their trades faster and cheaper, and avoid slippage, which is the difference between the expected price and the actual price of a trade.
Regulation: A spot Bitcoin ETF is regulated by the SEC, which is the federal agency that oversees the securities markets in the US. The SEC ensures that the spot Bitcoin ETF complies with the rules and regulations that apply to all ETFs, such as transparency, disclosure, and reporting.
The SEC also protects the investors from fraud, manipulation, and abuse by the ETF provider or the market participants. A spot Bitcoin ETF also benefits from the tax advantages that apply to ETFs, such as lower capital gains tax and no tax on dividends or interest.
Why Are Spot Bitcoin ETFs Important For The Crypto Market?
The approval of spot Bitcoin ETFs by the SEC was a historic moment for the crypto industry, as it marked the first time that the SEC recognized Bitcoin as a legitimate and investable asset class. The approval of spot Bitcoin ETFs also opened the door for more institutional investors, such as hedge funds, pension funds, and endowments, to enter the crypto market and increase the demand and adoption of Bitcoin.
The impact of spot Bitcoin ETFs on the crypto market can be seen in several ways, such as:
Price: The launch of spot Bitcoin ETFs created a surge in the price of Bitcoin, as more investors flocked to buy the new and convenient way of investing in Bitcoin. The increased demand for Bitcoin also reduced the supply of Bitcoin on the spot market, as the ETF providers had to buy and hold Bitcoin to back their shares. This created a positive feedback loop that pushed the price of Bitcoin higher and higher, reaching new all-time highs in 2024.
Volatility: The introduction of spot Bitcoin ETFs also reduced the volatility of Bitcoin, which is the measure of how much the price of Bitcoin fluctuates over time. The reduced volatility of Bitcoin was due to the increased liquidity, efficiency, and stability of the spot Bitcoin ETF market, which smoothed out the price movements of Bitcoin and made it less susceptible to sudden shocks and swings.
The reduced volatility of Bitcoin also made it more attractive and reliable for investors, especially those who are risk-averse or long-term oriented.
Innovation: The approval of spot Bitcoin ETFs also stimulated the innovation and development of the crypto industry, as it encouraged more entrepreneurs, developers, and researchers to create new and improved products, services, and solutions for the crypto market.
The approval of spot Bitcoin ETFs also inspired more regulators, policymakers, and lawmakers to adopt a more favorable and supportive stance towards crypto, and to create more clear and consistent rules and frameworks for the crypto industry.
How to Invest in Spot Bitcoin ETFs in 2024?
Investing in spot Bitcoin ETFs in 2024 is easy and straightforward, as long as you follow these steps:
Step 1: Open a brokerage account. To invest in spot Bitcoin ETFs, you need to have a brokerage account that allows you to trade ETFs. You can choose from a variety of online brokers that offer different features, fees, and services, such as E-Trade, TD Ameritrade, or Robinhood.
You can also use a robo-advisor, such as Betterment or Wealthfront, which can automatically manage your portfolio and invest in spot Bitcoin ETFs for you.
Step 2: Fund your account. To buy shares of spot Bitcoin ETFs, you need to have enough money in your brokerage account to cover the cost of the shares and the commissions or fees charged by the broker. You can fund your account by transferring money from your bank account, credit card, or other sources, depending on the options available by your broker.
You can also use a service like PayPal or Venmo to send and receive money online.
Step 3: Choose a spot for Bitcoin ETF. To invest in spot Bitcoin ETFs, you need to select a spot Bitcoin ETF that suits your preferences, goals, and risk tolerance. You can choose from a range of spot Bitcoin ETFs that differ in their size, performance, fees, and features, such as Bitwise Bitcoin ETF, VanEck Bitcoin Trust, WisdomTree Bitcoin Trust, or Grayscale Bitcoin Trust.
You can also use a tool like ETF.com or ETFdb.com to compare and analyze different spot Bitcoin ETFs and find the best one for you.
Step 4: Buy and sell shares of spot Bitcoin ETFs. To buy and sell shares of spot Bitcoin ETFs, you need to place an order through your broker, either online or by phone. You can choose from different types of orders, such as market orders, limit orders, stop orders, or trailing stop orders, depending on your strategy and objectives.
You can also use a tool like TradingView or StockCharts.com to monitor the price movements of spot Bitcoin ETFs and identify the best entry and exit points for your trades.
What Are The Best Spot Bitcoin ETFs to Watch For in 2024?
The spot Bitcoin ETF market is constantly evolving and expanding, as more ETF providers launch new and improved spot Bitcoin ETFs to cater to the growing and diverse needs and demands of the investors. Some of the best spot Bitcoin ETFs to watch for in 2024 are:
Bitwise Bitcoin ETF (BITW): Bitwise Bitcoin ETF is the first and largest spot Bitcoin ETF in the US, with over $2 billion in assets under management as of January 2024. Bitwise Bitcoin ETF tracks the price of Bitcoin using the Bitwise Bitcoin Index, which is a rules-based index that aims to capture the true and accurate price of Bitcoin across multiple exchanges and platforms.
Bitwise Bitcoin ETF has a low expense ratio of 0.95% and a high liquidity of over $100 million in average daily volume.
VanEck Bitcoin Trust (VBTC): VanEck Bitcoin Trust is the second-largest spot Bitcoin ETF in the US, with over $1.5 billion in assets under management as of January 2024. VanEck Bitcoin Trust tracks the price of Bitcoin using the MVIS CryptoCompare Bitcoin Benchmark Rate, which is a transparent and reliable reference rate that reflects the real-time trading activity of Bitcoin across multiple exchanges and platforms.
VanEck Bitcoin Trust also has a low expense ratio of 0.90% and a high liquidity of over $80 million in average daily volume.
WisdomTree Bitcoin Trust (WBTC): WisdomTree Bitcoin Trust is the third-largest spot Bitcoin ETF in the US, with over $1 billion in assets under management as of January 2024. WisdomTree Bitcoin Trust tracks the price of Bitcoin using the CME CF Bitcoin Reference Rate, which is a regulated and standardized rate that aggregates the trade flow of Bitcoin from major spot exchanges.
WisdomTree Bitcoin Trust comes in third with low expense ratio of 0.85% and a high liquidity of over $60 million in average daily volume.
Grayscale Bitcoin Trust (GBTC): Grayscale Bitcoin Trust is the oldest and most well-known spot Bitcoin ETF in the US, with over $20 billion in assets under management as of January 2024. Grayscale Bitcoin Trust tracks the price of Bitcoin using the TradeBlock XBX Index, which is a robust and dynamic index that measures the global spot price of Bitcoin.
Grayscale Bitcoin Trust has a high expense ratio of 2.00% and a low liquidity of over $40 million in average daily volume.
These are some of the best spot Bitcoin ETFs to watch for in 2024, but keep this in mind, they are not the only ones. There are many other spot Bitcoin ETFs that offer different features, benefits, and risks, such as ARK Bitcoin ETF, ProShares Bitcoin ETF, Invesco Bitcoin ETF, or Coinbase Bitcoin ETF.
Parting shot
Spot Bitcoin ETFs are a new and exciting way of investing in Bitcoin, the most popular and valuable cryptocurrency in the world. Spot Bitcoin ETFs offer investors many advantages over other ways of investing in Bitcoin, such as accessibility, liquidity, regulation, and innovation. Spot Bitcoin ETFs also have a significant impact on the crypto market, as they increase the demand and adoption of Bitcoin, reduce the volatility of Bitcoin, and stimulate the growth and development of the crypto industry.
Spot Bitcoin ETFs are a game-changer for the crypto market and a great opportunity for investors. If you want to learn more about spot Bitcoin ETFs or any other crypto and blockchain topics, you can ask me anything you want to know. I’m here to help.
I hope you enjoyed reading this article and found it useful and informative.
If you have any questions, comments, or feedback, please feel free to share them with me. I would love to hear from you.
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