💰 What is a Bitcoin ETF? – Complete Beginner’s Guide on Bitcoin ETFs (2024 Updated)

What is a Bitcoin ETF? Is it better than buying actual Bitcoins? How do I choose the best ETF overall And how does it impact the price of Bitcoin? Well…stick around, In this episode of Crypto Whiteboard Tuesday We’ll tackle these questions and more. Hi, I’m Nate Martin from 99Bitcoins.com And welcome to Crypto Whiteboard Tuesday, Where we take complex cryptocurrency topics, Break them down And translate them into plain English. Before we begin, Don't forget to subscribe to the channel And click the bell so you’ll immediately get notified When a new video comes out. Today’s topic is the Bitcoin spot ETF. Up until recently, buying bitcoin was a process that required you To buy actual bitcoins and hold them Either in your own Bitcoin wallet Or have someone else hold them for you, Like in a Bitcoin exchange. But if you’re not interested in holding the actual coins And only want to speculate on Bitcoin’s price movements, Then this process is a bit of an overkill, As it requires you to take care of the security of your coins. Nowadays, by investing in a Bitcoin ETF, You can speculate on Bitcoin’s price Without buying actual bitcoin. ETF stands for Exchange Traded Fund And it’s a financial instrument That aims to track the price of a particular asset Or asset group, in this case, Bitcoin. In simple terms,

It’s a note that you buy from a company That aims to track the price of Bitcoin, And you can sell that note When you want to get out of your investment. Let’s break down the ETF abbreviation Into its components to see how it works: The E, or Exchange in ETF, means ETFs are bought and sold Like any other stock on an exchange. The T, or Traded, means ETFs are traded And experience price changes throughout the day. And the F, or Fund, means that ETFs generally hold A collection of assets in one fund In order to effectively track the price it’s aiming to track. One important feature is that the Securities and Exchange Commission, An independent federal agency, regulates ETFs in the United States, This means that the government oversees the trading of ETFs In order to ensure investor’s safety and to prevent fraud. Now you may have heard the Bitcoin ETF Being referred to as a Bitcoin Spot ETF. Let’s break that term down as well. A Bitcoin Spot ETF is the term used for a note, Or a financial instrument in technical terms, That tracks the current price of Bitcoin. This is opposed to a Futures ETF that tracks bets, Or to put it more technically, contracts to buy or sell Bitcoin, At a future date. So how exactly do you buy a Bitcoin ETF? Well, you can find an online broker such as Robinhood, eToro, Fidelity, WeBull and Charles Schwab. You can also ask for a Bitcoin ETF To be included in your traditional IRA, Roth IRA or 401(k) plan. But I guess you may be asking “Does an ETF track the price of Bitcoin to a tee?” The answer is – not exactly.

While the ETF aims to mirror the performance of Bitcoin, ETFs always experience tracking errors That create a gap between the ETF’s price And Bitcoin’s actual price. These tracking errors can occur due to market conditions, The ETF management’s strategy Or the fees that are associated with the ETF. So let’s try to summarize how buying an ETF Compares to buying Bitcoin. For starters, ETFs are much more accessible To the general public As acquiring them doesn't require much technical know how. When you buy an ETF You don’t have to worry about getting a Bitcoin wallet, Creating a backup of your seed phrase Or keeping your wallet in a safe place. ETFs are also much easier to trade, As it’s possible to do so through many popular platforms. Additionally, the fact that ETFs are regulated Adds another layer of investor protection, While when you buy actual bitcoin, for better or for worse – You’re on your own. On the downside, ETFs aren’t available to buy or sell 24/7 Like you can do with actual bitcoins on a cryptocurrency exchange. Meaning when the markets are closed, You can’t trade your ETF shares. Additionally, when bitcoin’s price becomes extremely volatile, Some ETFs might not be available for buying or selling As a protective measure from the ETF issuer. This means that you may not be able to take advantage Of big price swings when they happen. ETFs also require you to pay a management fee for holding them. Although these fees are relatively low,

They still make an ETF more expensive to hold Than actual Bitcoins, Which aren’t associated with any holding fees. There’s also the tracking error which we’ve already covered – An ETF will never track the price of Bitcoin correctly by 100%. Unlike Bitcoin, ETFs can only be traded for cash Whereas Bitcoin can be used as a means of payment For a variety of products and services. And finally, While holding an ETF allows you to earn from Bitcoin’s price movements, It doesn’t allow you to have full custody of actual Bitcoins, Meaning you’re always exposed to the risk of A certain ETF issuer going bust or defaulting on their promises. Assuming you still want to buy a Bitcoin ETF, Let’s go over how to choose the best one for you. At the time of shooting this video There are 11 different Spot Bitcoin ETF options Available in the US. I’ll start out by saying there’s no such thing as a perfect ETF. Choosing an ETF is based on personal preferences As much as it’s based on hard data. Here’s a list of things you’d want to consider Before choosing your ETF: The first thing you’ll want to look at Is the management fees of the ETF Also known as expense ratio. Lower fees directly affect the overall return And make the investment in the ETF More correlated to investing in actual Bitcoins. At times ETF issuers offer to waive the management fees For a certain period in order to attract new investors. Another thing to consider when choosing an ETF Is the brand name and reputation of the ETF issuer. Choosing an ETF from a reputable issuer

With a track record of managing ETFs Can yield better results In terms of correctly tracking bitcoin’s price And of managing your funds overall. If the issuer has experience with crypto related assets, That’s an additional plus. Finally, you’d want to look at the ETF’s Assets under management, or AUM. Higher AUM may reflect greater investor confidence in the ETF And this also usually correlates with greater liquidity, Meaning it’s easier to buy and sell your ETF shares. Finally, let’s address how the approval of the bitcoin spot ETFs May affect Bitcoin’s price. Since the companies issuing the ETFs are required To hold actual bitcoins In order to back up the notes they are issuing, Buying pressure is created And the price tends to go up as ETFs become more common. Additionally, the availability of a Bitcoin spot ETF Allows institutional investors such as pension funds, Hedge funds and other investor groups To invest in Bitcoin as well, Potentially creating even more buying pressure, Driving the price up further. Combine all of this with the 2024 halving event Which will cut the generation of new Bitcoin in half And you get a mix of higher demand With tightening supply, and when that happens, The price of an asset almost invariably goes up. Having said that, Keep in mind that anything can happen, Especially with Bitcoin, What I’m sharing with you is not investment advice. You should always do your own research

And decide for yourself if you want to invest in anything. To sum things up, A Bitcoin ETF is a good solution If you just want to bet on Bitcoin’s price Without all of the technical hassles of securing And managing your Bitcoins. But remember, In extreme market conditions You may not be able to actually trade your ETF, And you’ll always be at the mercy of the ETF issuer. That’s it for today’s episode of Crypto Whiteboard Tuesday. Hopefully by now you understand what a Bitcoin spot ETF is – A note issued by a company that holds bitcoin for its investors, And attempts to accurately track the price of Bitcoin. Maybe you’d like to start investing in Bitcoin ETFs. If so, we’ve included a list of links in the description To a number of places where you can get started. You may still have some questions. If so, just leave them in the comment section below. And if you’re watching this video on YouTube, And enjoy what you’ve seen, Don’t forget to hit the like button. Then make sure to subscribe to the channel And click that bell so that you’ll be notified As soon as we post new episodes. Thanks for joining me here at the Whiteboard. For 99bitcoins.com, I’m Nate Martin, And I’ll see you…in a bit. If you’ve enjoyed this video, leave us a thumbs up, Subscribe to the channel, and click the notification bell So you don’t miss a review, news update, Or the clearest information about bitcoin and cryptocurrencies anywhere.