Crypto Exposure: Exploring Passive Investing Opportunities Using Bitcoin ETFs

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Crypto Exposure: Exploring Passive Investing Opportunities Using Bitcoin ETFs

Price volatility and rapidly changing emotions that can lead to quick gains or losses can make cryptocurrencies overwhelm participants in stock markets and other traditional markets.

However, given the increasing levels of crypto acceptance and changing public opinion on the importance of digital currencies in the future of the Web3, more and more investors are eager to engage in this asset class.

ETFs provide access to cryptos with drawbacks

Some exchange traded funds (ETFs) that provide access to cryptocurrencies like Bitcoin BTC/USD without the hassles of holding or protecting crypto tokens through an online or hardware wallet have emerged, offering the best of both worlds.

The ProShares Bitcoin Strategy ETF BITOwhich originally proposed the idea in October 2021, attracted investments totaling around $1 billion in the concept’s first days of operation.

Investors have two options for purchasing BITO shares, which are actively traded on the NYSE Arca Network: directly through ProShares or through a brokerage.

BITO ETF Most Actively Managed BTC

The most actively managed BTC ETF, BITO has over $800 million in assets under management (AUM) and invests in BTC futures, Treasury securities, and cash.

The ProShares Short Bitcoin ETF COCK, the latest entry into the BTC ETF market, is another product offered by ProShares. It was introduced in June 2022.

Unlike BITO, BITI uses a short selling strategy to trade in cash-settled futures markets with the aim of mirroring the daily performance of BTC.

BITI, which has an AUM of $62 million, is becoming increasingly popular among investors who are more interested in making money from a decline in the price of BTC over a period of time.

Investors can also choose to buy shares of the Valkyrie Bitcoin Strategy ETF BTF, VanEck Bitcoin Strategy ETF XBTF, AdvisorShares Managed Bitcoin Strategy ETF CRYPWhere ETF Global X Blockchain & Bitcoin Strategy PARTS.

BTF, which debuted shortly after BITO with an AUM of $22 million, wants to invest almost all of its funds in BTC futures.

Similar to BITO in concept, BTF and BITO are trading at prices nearly 70% below their listing prices due to the virtually identical drop in BTC’s price from its all-time high of $68,890 in November. 2021.

XBTF is established as a C corporation and is independently taxed under Internal Revenue Service regulations, which are slightly different from BITO and BTF (IRS).

Reinvesting in ETFs can help pay less tax

Reinvesting long-term capital gains or dividends in the fund could help some investors pay less tax through taxable distributions.

XBTF, which has a lower expense ratio and is comparable in size to BTF, slightly outperformed both BITO and BTF.

Unlike these BTC ETFs, BITS spreads its holdings among indirect investments in blockchain companies that are well-positioned to profit from the growing use of blockchain and BTC futures.

In order to provide its investors with long-term capital growth, the fund takes long positions in BTC futures contracts.

BITS, which is smaller than the previously mentioned BTC ETFs and has an AUM of $8.4 million, holds more than 50% of its assets in the Global X Blockchain ETF BKCH.

The CRYP ETF, which provides exposure to BTC through BTC futures ETFs, BTC futures, short-term fixed income instruments, and cash or cash equivalents, is the latest but not the least.

The smallest of the six BTC ETFs, CRYP has an AUM of $172,000 and only has 10,000 outstanding shares available for trading.

Besides these six BTC ETFs that have been approved by the United States Securities and Exchange Commission (SEC), there are many other proposals pending approval that could significantly add to the options available in the BTC ETF space.

By choosing one of the BTC ETFs above, investors around the world can assume some exposure to BTC while benefiting from NYSE Arca’s fully automated and transparent open and close auctions in these ETFs.

SEC concerns prevent ETFs from holding BTC

Because of SEC concerns about BTC traded on insecure cryptocurrency exchanges, neither BTC ETFs really hold any BTC, but they provide investors with exposure to fluctuations in the cryptocurrency market and the opportunity to profit from long-term price growth.

Despite the fact that none of these BTC ETFs have produced positive capital gains since their launch, things could soon change if BTC resumes its upward movement.

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