How to invest in Bitcoins through an ETF?
Recently, it has become possible to invest in Bitcoins directly on the stock market by buying a Bitcoin ETF! But how does investing in Bitcoins with an ETF actually work and which ETFs can you buy? In this article, you will find everything you need to about trading Bitcoins directly with an ETF.
How to buy a Bitcoin ETF?
You need an account with a broker to be able to invest in Bitcoin ETF’s. In the overview you can see which brokers you can use for investing in Bitcoin ETF’s:
| Brokers | Benefits | Register |
|---|---|---|
 | Buy Bitcoin ETF without commissions. Your capital is at risk. Other fees may apply. | |
 | Speculate with CFD's on increasing & decreasing prices of Bitcoin ETF! 82% of retail CFD accounts lose money. | |
 | Benefit from low fees, an innovative platform & high security! | |
 | Speculate on price increases and decreases of Bitcoin ETF with a free demo! |
After you open a brokerage account, you must first go through the verification steps and deposit funds. Only once there is money in your account can you invest in Bitcoin ETFs.
After you have deposited funds into your brokerage account, you can navigate to a Bitcoin ETF you want to invest in. This could be the VanEck Vectors Bitcoin ETN with ISIN code DE000A28M8D0, for example. Then click on the buy button to open the order screen for this Bitcoin ETF.
You can enter how many shares of the ETF you want to buy. You can use a market order or a limit order:
- Market order: you buy the Bitcoin ETF at the current price.
- Limit order: you buy the Bitcoin ETF at a specific price.
What are Bitcoin ETFs?
An ETF, or exchange traded fund, is a passive fund that is traded on the stock market. This means that you can buy & sell an ETF directly on the stock market, just like a share.
A Bitcoin ETF is a fund that tries to track the price of Bitcoin as closely as possible. When you invest in a Bitcoin ETF, you can easily track the price of Bitcoin within your portfolio.
Do you want to know how ETFs work? Then read our ETF explanation article:
How much does investing in Bitcoin ETFs cost?
It is always important to pay attention to costs when investing, as costs reduce returns! When you buy an ETF, you pay transaction fees.
You will also encounter a spread: this is the difference between the buy and sell price. In times of high volatility, the difference between the buy and sell price can increase significantly, which results in higher transaction costs.
Additionally, don’t forget to investigate the management fees. Most ETFs charge 1% yearly in management fees, which reduces your return. You can avoid these costs by physically buying Bitcoins.
What are the best Bitcoin ETFs?
WisdomTree Bitcoin ETP
Wisdom TreeBitcoin physically buys Bitcoins, and the fluctuations in the value of this product are therefore linked to the development of the Bitcoin price. You can trade this effect under ISIN code GB00BJYDH287.
VanEck Vectors Bitcoin ETN
The VanEck Vectors Bitcoin ETN is a Bitcoin ETF listed in euros. You can trade this ETF on the German stock exchange under ISIN code DE000A28M8D0.
VanEck Vectors Ethereum ETN -EUR
You can invest in another popular cryptocurrency with this ETF: Ethereum. The VanEck Vectors Ethereum – EUR is listed under ISIN code DE000A3GPSP7.
What are the benefits of investing in Bitcoin ETFs?
The biggest advantage of Bitcoin ETFs is simplicity. When you buy Bitcoins yourself, you have to store them securely in a wallet. You also need an extra account with an exchange to store the Bitcoins. This is not the case with an ETF: a third party takes care of this for you, so even with little knowledge, you can benefit from investments in the crypto market.
Another advantage is security. With an ETF, you are generally protected against possible hacks. Your ETF has a certain value that is linked to the price development of Bitcoin.
What are the disadvantages of investing in Bitcoin ETFs?
The biggest disadvantage of Bitcoin ETFs are the extra fees. You pay the fund for managing the Bitcoins. Bitcoin ETFs are therefore not cheap: you pay roughly 1% in managements costs annually. If you invest $10,000 in a Bitcoin ETF, you will pay$100 each year, regardless of the results of the fund.
The liquidity can also be a problem: when many people withdraw at the same time, the fund suddenly has to sell large amounts of Bitcoins. Especially when the market crashes, this can be a challenge. However, this risk also applies to the physical Bitcoin market since it is also difficult to sell your Bitcoins when the market suddenly drops significantly.
The lack of control is also a disadvantage of Bitcoin ETFs. For example, you cannot perform staking to earn extra returns. It is also more challenging to diversify your risks by investing in a group of cryptos.
Bitcoin ETFs and the news
Bitcoin ETFs receive a lot of media attention: this is not surprising given the sharp price increases of Bitcoin itself. An increasing number of investors are seeking out methods to invest in Bitcoins and where there is demand, supply arises. Therefore, an increasing number of countries work on launching ETFs.
These launches are generally positive for the Bitcoin price: when Bitcoin becomes more accessible, more money flows into it, which can further boost the price. A large Canadian fund, for example, already owns more than 20,000 Bitcoins, and this number is growing rapidly due to increasing demand.
Funds in the United States also work hard to obtain permission to launch a Bitcoin ETF. If this succeeds, even more money is expected to flow into Bitcoin, which could give the price an even further boost.
Therefore, if you consider an investment in Bitcoin, it is worth to keep an eye on the price development of Bitcoin.
Frequently Asked Questions about Bitcoin ETFs
Bitcoin ETFs are safer than buying Bitcoins yourself. Bitcoin accounts can be hacked, which causes you to lose a significant portion of your money. However, this does not mean that Bitcoins are not speculative investment products. Due to fluctuations in the price, you can still lose a lot of money with investments in a Bitcoin ETF.
ETFs can affect the Bitcoin price. As more Wall Street companies enter the crypto market, the chances of price manipulations increase. When companies manipulate ETF prices, the Bitcoin price can suddenly make unexpected moves.
Bitcoin ETFs are not the same as physical Bitcoins. A Bitcoin ETF tries to track the price of a Bitcoin by holding physical Bitcoins or buying Bitcoin derivatives. When you buy an ETF, you are not directly the owner of a Bitcoin.
