Investing in crypto funds: These Bitcoin ETFs make it easy to get started

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Thomas Martin

Bitcoin ETF is an exchange-traded fund. This tool allows investors to participate in Bitcoin price movements without directly owning the cryptocurrency. Instead, these ETFs invest in cryptocurrency and therefore reflect the price development of Bitcoin.

The advantages are obvious. Investors do not need to hold the digital currency in a ‘risky’ crypto wallet or digital wallet, but can complete the purchase and sale of Bitcoin ETFs within their usual banking applications. ETFs move in and out of a portfolio like any other investment vehicle. ETFs offer low cost and high liquidity because they can be bought and sold during stock market trading hours.

In mid-January 2024, the US Securities and Exchange Commission (SEC) approved the trading of several Bitcoin ETFs. This means that these spot Bitcoin ETFs can be traded within a regulated framework, strengthening investors’ confidence in this investment category.

Trade volumes are increasing rapidly

The approvals led to a surge in Bitcoin ETFs and trading volumes exploded. According to data from Bloomberg news agency, between 2 and 3 billion dollars were traded daily in January. In the first week of March, volume reached over $10 billion.

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But not only transaction volumes, but also deposits in Bitcoin ETFs have increased rapidly. The iShares Bitcoin Trust ETF launched by Blackrock raised more than $800 million in new funds on March 5 alone. But Grayscale Bitcoin Trust still has the largest fund assets at $28.1 billion, followed by iShares Bitcoin Trust ETF ($11.9 billion), Fidelity Wise Origin Bitcoin ETF ($6.4 billion) and ARK 21 Shares Bitcoin ETF ($2.4 billion). 4 billion francs) follows. .

Selection criteria determine success

But size isn’t the only deciding factor when choosing an ETF. Total fees and transaction volume are equally important. When investing in financial products such as ETFs, investors should expect direct and indirect costs. Direct ETF costs consist of management fees, summarized as the Total Expense Ratio (TER) or total fee. This ratio shows the fund’s total costs as a percentage of invested capital.

Indirect costs refer to the spread, the difference between the buying and selling price of the ETF. In addition to these costs, investors should also take into account the transaction and custody fees requested by banks or brokerage firms.

Another important criterion is the trading volume on the stock exchange. In general, in high trading volume, the difference between bid and ask prices, that is, bid and ask prices, is smaller than in low trading volume. Accordingly, ETFs with high trading volumes should be preferred to those with low ones. There are ten Bitcoin ETFs that investors can trade on the Cash.ch platform according to the table below:

* Average trading volume of the last ten days in millions (source: Bloomberg, Cash.ch, as of March 7, 2024, non-discounted fees).

The analysis, taking into account the selection criteria, shows that the ARK 21Shares Bitcoin ETF, Fidelity Wise Origin Bitcoin ETF and iShares Bitcoin Trust ETF make sense for Swiss investors. These three ETFs combine to have a high market cap, attractive trading volume, and low fees.

When it comes to market capitalization benchmark, Grayscale Bitcoin Trust ETF has the highest assets under management (AuM) as this ETF has already existed for some time – but was in the unregulated space before approval. However, Grayscale’s ETF has significantly higher fees than competitors, which is a detriment to the investment. The higher the fees, the lower the profit left in the investor’s pocket. This also applies in case of a loss because it will be even higher.

A Swiss-linked Bitcoin ETF

ARK 21 Share Bitcoin ETF has Swiss roots. The ETF is the joint product of Cathie Wood, one of Wall Street’s most successful finance women, with ARK Investment. He joined crypto company 21Shares in May 2021 and has been on the Zurich company’s board of directors since then. 21Shares recently started operating under the name 21.co. The first Swiss crypto unicorn now manages client assets worth over five billion dollars.

Not for the faint of heart investors

Bitcoin is one of the most volatile investment instruments ever. Average daily price fluctuation is 2.4 percent; a year ago this value was as high as 3.2 percent. After Bitcoin gained more than 50 percent in value since the beginning of the year, it is not surprising that volatility has increased significantly again in the last two weeks.

Downward price corrections are especially challenging: On February 28, Bitcoin lost 6.5 percent of its value in four hours, and on March 5, the cryptocurrency fell 14.5 percent in six hours. before.

Bitcoin is an electronic currency that exists only in virtual space and was developed by a person or group under the pseudonym Satoshi Nakamoto. The basis of Bitcoin is blockchain, a decentralized database. New Bitcoins are created and managed in a decentralized manner on the network. Unlike classical currencies, unlimited amounts of Bitcoin cannot be created. This is limited to 21 million. The price of Bitcoin is determined by supply and demand. Bitcoin does not represent a fundamental fundamental value.

Source :Blick

Tim

I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.