ETFs
Are Spot Bitcoin ETFs Creators of Millions?
During its 15 years of history, Bitcoin (CRYPTO:BTC) is up over 18,000% and has made many millionaires along the way. But what about spot Bitcoin ETFs?
Approved by the United States Securities and Exchange Commission in January 2024, the 11 spot Bitcoin ETFs now available to investors make investing in Bitcoin as simple as purchasing a stock through your favorite brokerage. Gone are the days of navigating complex crypto exchanges and digital wallets.
Now, investors can expose their portfolios to Bitcoin’s unique abilities to create millionaires by simply purchasing an exchange-traded fund. But before you do that, it’s crucial to understand what makes these ETFs different from each other – and which one is the best option to help you achieve millionaire status as Bitcoin continues its price appreciation journey.
Bitcoin’s Growth Trajectory and Spot ETFs
Since spot Bitcoin ETFs track the price of Bitcoin, similar to how gold ETFs track the price of gold, the chances of reaching millionaire status depend on Bitcoin’s ability to continue growing. Fortunately, its inherent characteristics should make cryptocurrency more valuable over time.
While exploring the unique qualities of Bitcoin that promote price appreciation over time is a topic for another day, investors should keep in mind that Bitcoin is still in its early stages of adoption , and many analyzes suggest that it is in a similar position to that of the early days. of the Internet. Well-known Bitcoin analyst Willy Woo believes there is as much wealth-creating value currently as Internet investors experienced after the turn of the millennium.
Additionally, now that spot Bitcoin ETFs have been approved, deep-pocketed institutional investors, previously excluded from the Bitcoin market, have entered the game. This means that even more pressure will be put on the limited supply of Bitcoin.
Although buying Bitcoin itself would be the best way to capitalize on its future growth, ETFs remain a viable option to help you achieve millionaire status. However, if you do, there are a few other things to keep in mind.
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Understanding the Effect of Fees
This may seem simple. If Bitcoin rises, ETFs will rise as well. However, an additional factor comes into play: fees.
Each Bitcoin ETF is provided by a company. And since these companies are in the business of making money, they charge fees for their services. These fees may seem small, but for the investor who wants to become a millionaire, they cannot be overlooked.
Today, the 11 different spot Bitcoin ETFs trade with a range of fees. The lowest is Franklin Templeton Digital Wallet Trust (NYSEMKT: EZBC) at 0.19%. The highest is Grayscale Bitcoin Trust (NYSEMKT: GBTC) at 1.5%.
Let’s use a hypothetical scenario to compare the effect of these fees. Let’s assume that Bitcoin produces an annualized return of 30%, a mark whose history has proven to be the base case, and that our hypothetical investor invests $1,000 each year in these ETFs.
The Franklin Templeton ETF would make our investor a millionaire after 22 years. On the other hand, it would take investor Grayscale 24 years. It may not seem like much, but the effect ends up becoming more obvious. Within 30 years, our investor Franklin Templeton would have nearly $11 million, while the holder of the Grayscale ETF would be sitting at about $8 million, all because of a 1% fee difference. .
Finding a balance with assets under management
Finding an ETF with the lowest possible fees is the first step when trying to maximize your Bitcoin-powered millionaire dreams. However, there is another factor to consider: assets under management (AUM).
Funds with higher assets under management tend to have greater liquidity, meaning there are more buyers and sellers in the market, making it easier to buy or sell stocks without significantly affect the price. This liquidity can be particularly beneficial during times of market volatility, when rapid trade execution is essential.
Additionally, ETFs with larger assets under management often have more resources, allowing them to implement sophisticated trading strategies and employ experienced portfolio managers. These resources can improve the fund’s ability to accurately track the underlying price movements of Bitcoin, thereby reducing tracking errors and ensuring that the ETF accurately reflects the performance of Bitcoin.
Of the 11 spot Bitcoin ETFs, the Grayscale Bitcoin Trust leads the way with over $18 billion in assets under management. However, these are the highest fees. Providing a more reasonable balance is BlackRock’s priority iShares Bitcoin Trust (NASDAQ: IBIT), with $17.3 billion in assets under management and fees of 0.25%. There is also the Fidelity Wise Origin Bitcoin Fund (NYSEMKT: FBTC), with $9.5 billion in assets under management and a similar 0.25% fee that is currently waived but will take effect in August.
Become a millionaire
In the investment world, few assets compare to the excitement and potential of Bitcoin. As the leader in the cryptocurrency asset class, Bitcoin is well-positioned to ride the wave of growing interest in digital assets around the world.
Some experts predict its value could skyrocket more than a million dollars before 2030, as new demand competes for its limited supply. Spot Bitcoin ETFs can help investors realize their dream of becoming a millionaire in a simple and straightforward way. Remember to balance fees with assets under management.
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RJ Fulton has positions in Bitcoin and iShares Bitcoin Trust. The Motley Fool posts and recommends Bitcoin. The Motley Fool has a disclosure policy.
Are Spot Bitcoin ETFs Creators of Millions? was originally published by The Motley Fool