Exchange-traded funds (ETFs) are a type of investment fund that trades on a stock exchange just like ordinary shares of a company. ETFs can be created for almost any kind of investment, including stocks, bonds, commodities, and even real estate.
The primary difference between ETFs and mutual funds is that ETFs trade on stock exchanges, whereas mutual funds trade through banks or brokerages. Because investors can buy and sell these ETFs at will, a Bitcoin ETF would make it much easier for retail and institutional investors alike to gain exposure to crypto-assets without having to store their coins themselves. This accessibility and assurance makes them more suitable and appealing for traditional institutions as well as individual investors.
What is a Bitcoin ETF?
In short, a Bitcoin ETF gives stock market investors exposure to a basket of cryptos, including Bitcoin exposure. Bitcoin ETFs would be a valuable tool for investors with a high-risk, high-reward investment objective.
One big reason for Bitcoin ETFs is that they make investing in crypto as easy as investing in stocks or mutual funds.
The second reason is custody. With custody solutions provided by an investment vehicle such as an ETF, you can safely store your coins away from hackers while still accessing them whenever necessary—allowing you control over your assets and security at the same time. Traditionally, investors would have to maintain their own digital wallets and manage the associated security factors.
Finally, Bitcoin ETFs would provide investors with alternative market exposure without paying exorbitant fees. With the introduction of Bitcoin ETFs comes the opportunity for everyday people everywhere to get involved in this exciting new financial technology space.
The Latest With Bitcoin ETFs
There are currently no Bitcoin ETFs approved by the Securities and Exchange Commission. In other words, no US stock market offers a Bitcoin ETF.
That said, as ETF.com reports, there are currently 12 active bitcoin ETF applications in the pipeline, including by VanEck, Invesco, Valkyrie, ProShares, and others. Each applicant submitted a prospectus for informational purposes in an attempt to be approved per the SEC’s standpoint on digital assets.
There’s also the Grayscale Bitcoin Trust (GBTC), whose issuer aims to convert to an ETF once it’s allowed to do so.
All active filings were filed this year.
That said, regulators continue to stonewall on approving any ETFs, delaying any potential ETF launch.
The SEC has previously been clear that they do not yet plan to approve any crypto-based ETFs, including Bitcoin. This denial is mainly due to crypto’s vulnerability to price volatility and manipulation and that overseas exchanges don’t offer the same level of protection as the US equity market. As long as the price of Bitcoin remains volatile and Bitcoin exchange platforms remain risky, it’s uncertain when a Bitcoin ETF would be approved.
That said, Bloomberg reports that the SEC’s current Chairman, Gary Gensler, has signaled a pathway to Bitcoin ETF approval. Moreover, blockchain market conditions have improved, and crypto is now seen as a legitimate alternative asset class by many investors.
What Is The Best Alternative To A Bitcoin ETF?
If you want to gain exposure to Bitcoin without the hassles of storing and trading your coins yourself, then a Bitcoin IRA (aka a Crypto IRA) may be more suitable.
A Bitcoin Individual Retirement Account (IRA) is an account that allows individuals to save money tax-free for retirement. IRAs allow investors to invest in a wide variety of assets, and with iTrustCapital, you can invest in cryptocurrency and gold in your IRA.
Just like any other type of IRA account, your investments are sheltered from taxable events. All gains made in a Traditional, Simple, or SEP-IRA are tax-deferred until funds are withdrawn. Gains made in a Roth IRA are tax-free as long as no funds are removed until the age of 59 ½.
What Are the Advantages of a Bitcoin IRA?
The main advantage of a Bitcoin IRA is that it’s available now via iTrustCapital – unlike Bitcoin ETFs, which are still pending SEC approval. Once your contributions are made and processed, you have access growing list of cryptocurrencies.
Another advantage of iTrustCapital’s Bitcoin IRA is that it offers greater security. Cryptocurrencies on their platform are held in cold storage on SOC2 compliant, secure servers owned by custodial partners.
Unlike regular crypto accounts, where gains earned are subject to capital gains or income tax, earnings from Bitcoin IRAs are sheltered from taxable events.
Furthermore, iTrustCapitals trading fees are clearly stated and are low-cost – with just a 1% fee on crypto trades. This is in sharp contrast to other Bitcoin IRA companies, which charge up to 15% transaction fees.
In conclusion, a Bitcoin IRA offers greater control and tax advantages than buying cryptos on an exchange directly. Since Bitcoin ETFs aren’t available and wouldn’t provide the same tax advantages anyway, a Bitcoin IRA is a no-brainer solution.