New To Crypto? Here's A Beginner’s Guide To Bitcoin ETFs

Date Nov 1, 2021
Blog category Cryptocurrencies
By Sieg C
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Investors all over the world are jumping in on the Bitcoin craze, especially as it remains the most stable in an otherwise volatile market. But of course, there are still considerable risks that aren’t present in other assets.

For those who want to capitalise on the rapid growth of Bitcoin but don’t want to own or invest in digital money, Bitcoin ETFs offer you a safer, simpler, and less risky investment in the crypto market.

What is a Bitcoin ETF?

Bitcoin ETFs allow you to diversify your portfolio without trading Bitcoin assets. It tracks the performance of Bitcoin, meaning that they follow the price of the digital money too. What’s great about investing in Bitcoin ETFs is they’re pooled in larger securities. This lets you invest a basket of stocks in the same industry that interests you.

For example, you can choose to invest in a basket that holds stocks in the dairy or meat industries. Most of all, you can opt to diversify your holdings in a basket that focuses on sustainability — something that’s difficult to find in Bitcoin.

Read: Guide To Cryptocurrency In NZ: Invest, Buy and Trade

Why not invest in Bitcoin directly?

One of the most important characteristics of Bitcoin ETFs is not going through the complicated trading processes of digital money. It simply follows the price trends of the cryptocurrency. But if it simply copies Bitcoin prices, why not invest directly in Bitcoin?

Investing in Bitcoin ETFs actually comes with some benefits that you would not otherwise get when investing directly in Bitcoin.

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Skip complicated crypto trading processes

Starting a Bitcoin investment involves a lot of complicated processes that can be daunting for beginners. To hold Bitcoin, you have to set up a cryptocurrency wallet where you trade a fiat currency into a digital one. This can be done either through a hot or cold wallet.

After purchasing Bitcoin, you also have to set up a cryptocurrency exchange where you can sell, purchase, or trade on the market. Some crypto exchanges have wallet features, which can make this process a tad bit easier. Nonetheless, it still has more complicated processes when you need or want to withdraw your investment returns into cash.

With Bitcoin ETFs, investors don’t have to accomplish all these processes. They can simply buy, sell, and trade ETFs in traditional exchanges and stock markets. 

Read: How Do Taxes Work With Your Crypto Assets In New Zealand?

Investors can short sell when prices are about to go down

Short selling is a trading strategy that involves speculation to manage the risks of their investment. In this case, once investors believe that Bitcoin ETFs will go down in value, they can sell their investment to buyers that are willing to pay them at the market price.

This prevents investors from taking big losses. This isn’t something that you can do with Bitcoin investments. Cryptocurrency investors are most likely to take a loss because they sell their coins when the value has already gone down.

A better understanding of how the traditional trading works

While direct Bitcoin investment is now a lot more understood, traditional exchanges and stock markets are still better understood. There are thousands of guides, books, reviews, and expert advice, as it’s been studied for a long time. For beginners that are confused about traditional investing, there are a lot of professionals willing to help you.

The same can’t be said for investing in Bitcoin directly. As mentioned, there are now reviews and guides, but it still takes considerable knowledge and resources to start your Bitcoin investments. There are very few real trusted experts when it comes to cryptocurrency investing.

Read: How To Cash Out Bitcoin And Other Cryptocurrency In NZ

Why investing in Bitcoin ETFs is a smarter choice

Aside from the ease of investing, you may actually earn more when you invest in Bitcoin ETFs. This is because you’re more dependent on the growth of the technology, rather than the technology itself. In this case, you invest in blockchain technology, which Bitcoin is built upon. But, why is it exactly a smarter choice?

During the 1848 Californian Gold Rush, over 300,000 people went to California to try their luck and dig for gold. While this proved to be profitable in the long run, the sudden boom worried a lot of people that the gold market may crumble any time. Some people won’t take the risk, especially as its volatility and predictability hasn’t been identified at that time. These people opted to sell shovels, picks, pans, and tents instead. 

While the prices of these important items are still linked to gold, it’s a more stable and free option. As it’s traded just like any other product at that time, people didn’t need to go through complicated gold trading. Most of all, this meant they didn’t need to go through the rough working conditions in mining sites.

Merchants who sold shovels earned just as much, if not more money than those who joined the gold rush that time. This is exactly similar to investing in Bitcoin ETFs. You can earn just as much money without having to deal with the unpredictability and volatility of Bitcoin.

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How can you purchase Bitcoin ETFs?

To start investing in Bitcoin ETFs, you have three choices, each with their own pros and cons. Each process gives you only a certain exposure to some funds, so it’s important to choose according to how and where you want to invest. 

Read: All About Dogecoin: From Meme To Top Cryptocurrency

Purchase a Bitcoin ETF through an exchange or broker

This is the most common method for Kiwis to invest in Bitcoin ETFs. There are three ways to go about purchasing them through a stock exchange or a licensed broker:

  • Choose an ETF listed on a stock exchange 
  • Contact a broker for ETFs on a certain exchange like NASDAQ or NYSE
  • Purchase the ETF through a brokerage platform 

Purchase a Bitcoin ETF through a crypto exchange

Another way to get access to Bitcoin ETFs is through a cryptocurrency exchange. Although not as common, more and more exchanges are offering this option now.

There are two ways to go about your purchase through a crypto exchange:

  • Choose an ETF available on a crypto exchange 
  • Sign up for an exchange that offers the ETF that you want to invest in

Read: Bitcoin Plummets: Should You Pull Out Your Investments?

Get a Bitcoin ETF through a private purchase

This is one of the least common ways to purchase a Bitcoin ETF. As the name suggests, you directly purchase the asset from a private sale. This is usually restricted to accredited investors only, as it requires some requirements that an average investor may not possess.

Compare Bitcoin ETFs in New Zealand

Aside from Bitcoin, other cryptocurrencies such as Ethereum can also be purchased through ETFs. The purchase processes are typically similar to Bitcoin, but some platforms, exchanges, or brokers may require specialised processes.

For this list, Bitcoin ETFs are only listed.

ETF

Holdings

Availability

Minimum investment

ProShares Bitcoin Strategy ETF

Bitcoin futures contracts

NYSE Arca, US

1 share

Valkyrie Bitcoin Strategy ETF

Bitcoin futures contracts

NASDAQ, US

1 share

VanEck Bitcoin Strategy ETF

Bitcoin futures contracts

Cboe BZX Exchange, US

1 share

Purpose Bitcoin ETF

Bitcoin

Toronto Stock Exchange, CA

1 share

Evolve Bitcoin ETF

Bitcoin

Toronto Stock Exchange, CA

1 share

CI Galaxy Bitcoin ETF

Bitcoin

Toronto Stock Exchange, CA

1 share

3iQ CoinShares Bitcoin ETF

Bitcoin

Toronto Stock Exchange, CA

1 share

XBT Bitcoin Tracker One

Bitcoin

NASDAQ Stockholm, SE

1 share

XBT Bitcoin Tracker Euro

Bitcoin

NASDAQ Stockholm, SE

1 share

GrayScale Bitcoin Investment Trust

Bitcoin

SEC-accredited investors through a private sale

US$50,000



GrayScale Bitcoin Cash Investment Trust

Bitcoin Cash

SEC-accredited investors through a private sale

US$25,000



Read: What Is NFT? Your Guide To Non-Fungible Tokens In NZ

Should you invest in Bitcoin ETFs?

For now, this is a starting route for when you really want to gauge the growth of Bitcoin but don’t want to take on the full risks just yet. As you’re investing in a more stable market, you’re less likely to incur losses but less likely to experience astronomical growth in just a short time. This is perfect for those looking for a less aggressive investment option.

Nonetheless, investing in Bitcoin directly is also a nice option. It’s an aggressive investment option, giving you the chance to earn big in a short time. But unlike Bitcoin ETFs, it’s a riskier choice that even experienced investors may have a hard time.

Whatever your option, make sure to get the best deal by using our comparison tool at glimp! In just a few simple clicks, you can find the right crypto exchange or share investment app, or just about any financial tool that you need.

Find the best Cryptocurrency apps and wallets right here at glimp!

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