Everything you need to know on Bitcoin ETFs January 11, 2024

Bitcoin is evolving, and here’s the latest buzz is about its listing of 11 spot ETFs.

Here’s the upcoming listings of 11 spot ETFs as of 11 Jan 2024:

Name	Ticker	Issuer	Mgmt Fee (before waiver)	Mgmt Fee (after waiver)	Waiver Details	Exchange
Bitwise Bitcoin ETP Trust	BITB	Bitwise	0.20%	0%	6 months or $1 billion	NYSE
ARK 21Shares Bitcoin ETF	ARKB	ARK Invest & 21Shares	0.21%	0%	6 months or $1 billion	CBOE
Fidelity Wise Origin Bitcoin Trust	FBTC	Fidelity	0.25%	0%	Until July 31, 2024	CBOE
WisdomTree Bitcoin Trust	BTCW	WisdomTree	0.30%	0%	6 months or $1 billion	CBOE
Invesco Galaxy Bitcoin ETF	BTCO	Invesco & Galaxy	0.39%	0%	6 months or $5 billion	CBOE
Valkyrie Bitcoin Fund	BRRR	Valkyrie	0.49%	0%	3 months	Nasdaq
iShares Bitcoin Trust	IBIT	BlackRock	0.25%	0.12%	12 months or $5 billion	Nasdaq
VanEck Bitcoin Trust	HODL	VanEck	0.25%	0.25%	n/a	CBOE
Franklin Bitcoin ETF	EZBC	Franklin	0.29%	0.29%	n/a	CBOE
Hashdex Bitcoin ETF	DEFI	Hashdex	0.90%	0.90%	n/a	NYSE
Grayscale Bitcoin Trust (conversion)	GBTC	Grayscale	1.50%	1.50%	n/a	NYSE

Correct as of 11 Jan 24

This article aims to give you the facts and insights into the hotly discussed Bitcoin ETFs.

Let’s look back on the development of Bitcoin to today’s US SEC approval of Bitcoin spot ETF together!

Brief History of Bitcoin & Cryptocurrency

2008: An individual named “Satoshi Nakamoto” introduces the concept of Bitcoin.
2009:The Bitcoin network goes live, and mining of the first block occurs.
2010:Bitcoin sees its first documented transaction.
2011: Other alternative cryptocurrencies emerge.
2013: Bitcoin value reaches US$1,000 for the first time.
2014: The collapse of a significant cryptocurrency exchange, Mt Gox, shifts focus to alternative cryptocurrencies.
2017: Bitcoin price approaches US$20,000 but drops around 75% in value by year- end.
2018: A significant market downturn affects Bitcoin’s value.
2020: Despite wide fluctuations, Bitcoin’s value sees considerable growth.
2021: Bitcoin achieves a new price milestone of US$69,045. Regulatory bodies approve crypto-related products, despite a 64% drop in value.
2022: The crypto sector sees increased institutional interest and a growth in decentralized finance and digital collectibles.
2023: Blockchain technology advances. Countries explore digital fiat currencies.Regulatory scrutiny of cryptocurrencies intensifies.
2024: On 10 Jan 2024, the SEC approves 11 spot Bitcoin ETFs, marking a significant step in integrating cryptocurrencies into mainstream finance. However, concerns about Bitcoin’s volatility remain.

Background and Significance of Bitcoin Spot ETFs

Bitcoin Spot ETFs mark a pivotal advancement in the realm of cryptocurrency investment. These Exchange-Traded Funds provide investors with the opportunity to gain exposure to Bitcoin’s value without the need of direct ownership. Initially, Bitcoin investment was accessible through futures-based ETFs like BITO, which invested in Bitcoin futures contracts, focusing on future prices. Subsequently, trust-based ETFs such as GBTC emerged, holding actual Bitcoin for indirect ownership, simplifying the investment process.

The latest stride forward is the introduction of spot ETFs. Unlike futures-based ETFs, spot ETFs hold actual Bitcoin, allowing them to more accurately reflect the cryptocurrency’s real-time market price. This development is similar to the introduction of gold ETFs in the early 2000s, which simplified and broadened access to gold investment. Bitcoin spot ETFs allow easy investment through a brokerage account, making Bitcoin more accessible to a wider audience.

Pros and cons of ETF for Bitcoin:

Pros:

1. Increased Accessibility:
A Bitcoin spot ETF makes investing in Bitcoin accessible to anyone with a brokerage account.

2. Lower Cost:
Investing in ETFs is generally more cost-effective. For example; investing in a Gold ETF incurs lower cost compared to physically buying and holding gold.

3. Diversified Portfolios:
Investors can diversify their portfolios without the need to directly purchase Bitcoin.

4. Regulated Framework:
Spot ETFs provide a more regulated investment environment

5. Enhanced Liquidity:
They increase the liquidity of Bitcoin investments by potentially attracting more market participants to the stock exchange

Cons:

1. Limited Exposure:
Investors only gain exposure to Bitcoin’s price, rather than a diversified portfolio of cryptocurrencies

2. Market Volatility:
Bitcoin’s price exhibits high volatility, which may not be suitable for everyone.

3. Regulatory Challenges:
The legal status of cryptocurrency is still evolving, posing potential risks.

4. Uncertain Future:
The long-term utility and acceptance of Bitcoin remain uncertain.

5. Lack of Asset Backing:
Unlike traditional investments such as stocks or real estate, Bitcoin lacks intrinsic value or physical backing, This characteristic makes it more speculative and dependent on market sentiment

Trading Bitcoin ETFs

Trading Bitcoin ETFs involves following certain rules, like completing the Customer Account Review (CAR), Risk Warning Statements and W8 Form (for US market trading). These steps ensure investors understand the risks and know what they’re getting into.

Conclusion

The introduction of 11 spot Bitcoin ETFs marks a significant evolution in the cryptocurrency investment landscape. These ETFs provide investors with a new avenue to gain exposure to Bitcoin’s price movements without direct ownership of the cryptocurrency. They signify a growing interest in integrating digital currencies into traditional financial systems and provide a regulated and potentially more accessible investment option.

However, it’s crucial to acknowledge the risks associated with Bitcoin’s inherent volatility and the uncertain regulatory environment surrounding cryptocurrencies. While Bitcoin spot ETFs represent a notable innovation, they also inherit the complexities and speculative nature of the underlying asset.

Investors must carefully consider these factors and conduct thorough research to understand the implications of investing in these ETFs. The decision to invest should be based on individual financial goals, risk tolerance, and a comprehensive assessment of the market environment.

What to do next

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Source:

^[1] https://www.bloomberg.com/news/newsletters/2024-01-09/the-race-to-the-bottom-in-spot-bitcoin-etf-fees-is-speeding-up-btc

Additional Risk Disclosure Statement for Payment Token Derivatives (“PTDs”)

Trading in PTDs such as cryptocurrency funds or ETFs, cryptocurrency CFDs or debentures that reference payment tokens carries a high level of risk. The Customer may risk losing all the Customer’s capital or more. The Customer must therefore be fully aware of the following risks associated with both derivatives and payment tokens/cryptocurrencies and carefully assess whether an investment in PTDs or cryptocurrencies is suitable for the Customer’s investment objectives and risk appetite:

Cryptocurrencies are not legal tender and are not issued by any government nor backed by any asset or issuer. Cryptocurrencies are currently not subject to any regulatory requirements or supervisory oversight by the Monetary Authority of Singapore (MAS). Hence the safeguards afforded under MAS’ regulatory framework may not apply to consumers dealing with unregulated products;
Cryptocurrencies have little or no intrinsic value, making them hard to value and are extremely volatile. Being highly speculative, investing in them entails high risk as prices are prone to sudden sharp swings as a result of unanticipated events or changes in market sentiments primarily due to the lack of price transparency;
Liquidity may also become limited and price gaps may occur in such circumstances;
Cryptocurrency exchanges, where cryptocurrencies are bought and traded, may be susceptible to cyber security breaches. In the event of a cyberattack and theft of cryptocurrencies, it may result in drastic, adverse price movements.

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ETF Desk

The ETF Desk is part of the Global Markets Team of Phillip Securities. The ETF Desk is responsible for the ETF business of Phillip Securities. The desk works closely with ETF issuers for distribution purposes, and on curating educational materials to retail investors such as seminars, webinars, market journal and video production.

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