The cryptocurrency market has grown enormously in the past few years but it’s not done yet. Allied Market Research has projected the crypto market to reach $9.94 billion by 2030. However, many traditional investors are still intimidated by the process of buying and holding cryptocurrencies. If this sounds like you, here are four reasons to consider a Bitcoin ETF instead.
You can diversify your investment
Bitcoin ETFs go beyond investing solely in Bitcoin. Some ETFs, like BLOK, indirectly gain exposure to Bitcoin by investing heavily in companies set to profit from the cryptocurrency’s growth. Companies like Coinbase (COIN), facilitating the buying and selling of cryptocurrency assets, and Hut 8 (HUT), a digital asset mining company focused on mining new Bitcoin, are among such investments. Additionally, funds like Fidelity’s Advantage Bitcoin ETF have over 99% direct investment in Bitcoin, making them a more straightforward option.
Protection from theft and loss
While Bitcoin enthusiasts prefer to hold their assets themselves, less tech-savvy investors are at risk of losing their cryptocurrencies to theft or negligence rather than government collapse. Choosing a Bitcoin ETF shields you from scammers and self-inflicted mistakes. Reports suggest that about 20% of Bitcoin’s total supply is now lost due to negligence, which includes losing passwords or seed phrases needed to access wallets.
Better regulatory oversight
One compelling reason to consider investing in a Bitcoin ETF is the increased regulatory oversight compared to investing directly in cryptocurrencies. The cryptocurrency market has been known for its volatility and lack of regulatory clarity, which can be a concern for traditional investors. By choosing a Bitcoin ETF, you benefit from the fund’s compliance with relevant financial regulations, offering you a greater sense of security and transparency.
Regulated Bitcoin ETFs must adhere to strict guidelines, ensuring proper custodial practices and investor protection measures. This regulatory scrutiny can mitigate some of the risks associated with the crypto market, making it a more attractive option for risk-averse investors who still want exposure to Bitcoin’s potential.
Liquidity and ease of trading
Bitcoin ETFs offer a level of liquidity and ease of trading that can be challenging to achieve with direct cryptocurrency investments. Unlike buying and holding individual cryptocurrencies, which may involve dealing with multiple exchanges and facing potential liquidity issues, Bitcoin ETFs trade on established stock exchanges.
This means you can buy or sell your shares in the ETF with ease, similar to trading stocks or other traditional assets. The presence of market makers in ETFs ensures a continuous supply of shares, contributing to higher liquidity levels. Additionally, the ability to execute trades during regular market hours adds an element of convenience that may appeal to investors who prefer a more structured and regulated trading environment.
Takeaway
Bitcoin ETFs provide an attractive investment avenue for those interested in gaining exposure to the cryptocurrency market without navigating the complexities and volatility risks associated with direct Bitcoin ownership.