Suppose you are a trader looking for ways to invest in Bitcoin without the need for a wallet and public keys. Then, a Bitcoin Traded Fund (ETFs) is the investment option for you. The ETFs allow you to track Bitcoin without having to buy Bitcoin.
However, there were many problems in Canada while trying to launch its first-ever bitcoin ETF. One of the major problems is that Bitcoin is the largest cryptocurrency in the world and highly unregulated.
Why Consider Bitcoin ETF?
The following are some of the basic things Bitcoin ETF offers;
It helps mimic the price of Bitcoin and while allowing you to trade the currency without owning it.
You can invest in Bitcoin without worrying about storage and security.
What Are ETFs?
ETF (Exchange Traded Funds) is an investment fund that allows for tracking an asset or index price. Today, there exist numerous types of ETFs that companies patronize.
The ETFs can either be asset-based, currency-based, or commodity-based.
What Are Bitcoin ETFs?
Bitcoin ETFs are exchange-traded funds that help you track the value of Bitcoin on traditional exchange platforms. It means you don’t have to trade cryptocurrency on the usual cryptocurrency exchange platforms.
As a result, you can invest in Bitcoin-like stock without thinking of wallet creation. Also, you are access to the current prices of bitcoin.
Therefore, by engaging in Bitcoin ETF, you can trade crypto assets with ease.
How Does A Bitcoin ETF Work?
Bitcoin ETF works the same way as most ETFs. It means that it tracks the value of the assets or commodity you want to add to your portfolio. So, as the price of Bitcoin fluctuates, it will impact the cost of the Bitcoin ETF and vice versa.
The primary advantage of a Bitcoin ETF is that it allows you to trade on platforms like NYSE or TSX.
Therefore, you do not require cryptocurrency exchanges such as Binance, Hotbit, Huobi and Kucoin, to perform trades.
Should You Buy The Bitcoin ETF?
One of the most popular investments in the world currently is crypto trading. However, the crypto market is very volatile. As a result, it is often better to invest your main assets in the stock market. That way, you don’t have to worry about the safety and security of your investment.
For most people, blockchain technology and cryptocurrency is still a very strange subject. So, it is not uncommon that people would be anxious about investing in crypto or trying to understand its lingua. Using ETFs, you can rely on common knowledge of stocks to trade on crypto assets.
Another reason to patronize Bitcoin ETF is the cost. It is relatively cheaper to trade the ETF than it is to trade bitcoin. So, the low entry cost of Bitcoin ETF is an ideal excuse to start investing.
BTCC will be trading on TSE (Toronto stock exchange). Therefore, you can buy them using your tax-free saving account (TFSA) and your Registered Requirement Savings Plan (RRSP). Doing so makes it possible for you to have tax-free investments.
Bitcoin ETFs In Canada
On the 18th of February, 2021, the Ontario Securities Commission (OSC) launched its first-ever Bitcoin ETF. The ETF is known as the Purpose Bitcoin ETF.
According to Toronto-based Purpose Investments Inc, when you buy a Bitcoin ETF, the fund helps you purchase real Bitcoin. It is a model similar to how companies keep gold and silver investments.
With the Purpose Investment Inc model, you can hold actual Bitcoin in your portfolio. Also, you can choose to either buy more or sell the one you already have.
For the very first time, you’ll have an easy means of directly investing in Bitcoin without the need for a wallet for trading.
Why People Consider Bitcoin EFT Risky?
The following are reasons why some people think that Bitcoin ETF is a high-risk investment:
The volatility of the price of Bitcoin.
Risk of changes of legislation.
Security attacks or hacking of trading platforms.
Risk of increased regulations.
Advantages Of The Bitcoin ETF
The following are the advantages you get for using a Bitcoin ETF:
When you invest in Bitcoin ETF, you can access the price of Bitcoin without having to learn how bitcoin works. Also, you avoid signing up for an exchange wallet.
Likewise, there is no need to take risks on purchasing bitcoin directly. Generally speaking, to buy bitcoin, you must have a wallet. There is the risk of losing your wallet should your password or private keys be lost.
So, Bitcoin ETF makes investing in Bitcoin easier and less stressful.
2. Tax Efficiency
Bitcoin is unregulated and decentralized.
However, the Bitcoin ETF that you trade on a traditional exchange under SEC regulation. Also, it is eligible for tax efficiency.
When you make use of an ETF, you get access to more than one asset.
For example, a Bitcoin ETF could consist of Bitcoin, Facebook stocks and Apple stocks. Therefore, you get to diversify your portfolio.
Similarly, when you trade on a registered market exchange platform, a Bitcoin ETF will enable you to diversify your existing equity portfolio.
4. Since you secure your Bitcoin ETF investment online in cold storage, there is little risk of online hacking.
Disadvantages Of Bitcoin ETFs
1. ETF inaccuracy
ETF monitors the price of the asset you wish to invest in, and it assists in the diversification of your portfolio.
Considering that since ETF provides a rough estimate of the price of Bitcoin, it is not an accurate tracker of its price.
2. Lack of Bitcoin ownership
Bitcoin is independent of central banks, and it provides a way to reduce risks associated with the financial system.
Bitcoin also protects you with privacy through its blockchain system. A bitcoin ETF will be regulated and controlled by the government, eliminating all these benefits.
3. Management fees
For using an ETF, you’ll be charged some fees for the convenience they provide. It means that the higher the Bitcoin ETF you own, the higher your fees over time.
4. Limits to cryptocurrency trading
You can exchange or swap Bitcoin to get other cryptocurrencies like Etherum, Litecoin, TRX, Dodge coin and more.
However, do note that as a holder of the ETF you’ll not be able to trade for other cryptocurrencies. The reason being that the ETF is not a currency but an investment fund that tracks the price of Bitcoin.
5. You can’t use your Bitcoin ETF to perform peer-to-peer transactions. When you sell off your ETF investment, you simply sell your stake.
Bitcoin ETF Approval In Canada
Canada’s primary securities regulator cleared the launch of the world’s first Bitcoin ETF. It is a trading platform that provides investors access to cryptocurrency. Today, these platforms are the most prominent investment platform in the world.
The first beneficiary for the Ontario Securities Commission approval is the Purpose Bitcoin ETF. The launch of this ETF marks the beginning of a new model for investing in crypto-based assets.
Investors can now seize to invest in Bitcoin in the same way they invest in stocks.
Before The Bitcoin ETFs
Before the bitcoin ETFs, investors could trade Bitcoin using CME derivatives on various exchanges.
However, this form does require that investors own some of the cryptocurrency they are investing in.
With the introduction of Bitcoin ETF, you can buy closed-end funds on TSE (Toronto Stock Exchange).
Understanding The Bitcoin ETFs Appeal
One of the benefits of investing in Bitcoin ETFs is that you can buy them at a net asset value. So, you can avoid buying it at a premium asset value.
In recent times, the interest in cryptocurrency has grown. It is not surprising as the price of Bitcoin continues to soar astronomically. As a result, both skeptics and new investors are looking for ways to tap into this fast-growing market.
Furthermore, many organizations such as Tesla and Amazon accept Bitcoin and some other cryptocurrencies as a means of payment. In so doing, people are accepting it as a valid source of payment.
Bitcoin ETFs In The US
In the United States, there have been eight unsuccessful attempts to launch a Bitcoin ETF. It is hard to imagine. Nevertheless, it is an assertion by Todd Rosenbluth, the director of ETF and mutual fund research at New York-based CFRA.
According to Todd, the primary issue delaying SEC approval for a successful launch of a Bitcoin ETF is influence. There is a healthy fear of market manipulation and verification of assets. Also, the process of custody is another question that needs an answer.
Meanwhile, some experts think that the approval of a Canadian Bitcoin ETF will help pave the way for an American one. Others believe that the SEC requires new leadership and insight. Perhaps, under new leadership, the SEC can review its stance on Bitcoin ETFs.
Canada On Bitcoin ETFs
The Canadian digital asset manager 3iQ Corp announced on Thursday that it has an agreement with the investment firm Coinshares to launch a new Bitcoin ETF. They plan to call it the3iQ CoinShares Bitcoin ETF. The ETF will be listed on TSE (Toronto Stock Exchange) in early April, awaiting regulatory approval.
Canada has already approved three Bitcoin ETFs making it the first country in North America to do so. In March, Brazil approved its first-ever Bitcoin ETF.
The Purpose Bitcoin ETF (BTCC)
BTCC, also known as Purpose Investment’s crypto ETF, provides you with exposure to the world’s most popular cryptocurrencies.
You can trade it on the TSX exchange platform.
BTCC Fees And Returns
Considering that this type of ETF is new, the return performance is not available. It is barely a year old.
However, Its management fee is 1%.
How To Buy Purpose Bitcoin ETF?
You can easily buy Purpose Bitcoin ETF on online brokerage platforms such as Questrade and Wealthsimple trade.
Wealthsimple Trade does not require any commission fee when you sign up with them. Also, you get a $25 bonus when you fund your account and trade with at least $100 or more.
Questrade provides you with a free ETF trading account. Their purchase fees range between $4.95 and $9.95 per trade when you sell. You can also qualify for the $50 in fee trades when you deposit $1000 or more.
Bitcoin ETF In Canada
Other Bitcoin ETF that you can check out include:
1. Evolve Bitcoin ETF (EBIT)
Evolve Bitcoin enables you to practically invest directly in Bitcoin with the aid of a brokerage account. It is available on the TSX exchange platform. The EBIT launched on the 19th of February, 2021.
EBIT Fees and Returns
Like the BTCC, the return performance is not yet available as it is barely a year old. Its management fee is 0.75%.
How to Buy Evolve Bitcoin ETF
You can buy EBIT easily with the aid of a brokerage account. In Canada, the online Brokerage platforms that sell EBIT are Wealthsimple Trade and Questrade.
Note: Wealthsimple Trade provides you with free ETF and stock purchases with a $25 bonus. Meanwhile, Questradeo provides you with free ETF and stock purchases. As a new customer, you get a $50 free trades using the SAVVY50 offer code.
2. CI Galaxy Bitcoin ETF (BTCX)
BTCX is one of the latest Bitcoin ETFs that you can buy in Canada. The BTCX is under CI Investments in partnership with Galaxy Digital Capital Management.
TSE (Toronto Stock Exchange) allows you to trade BTCX on its platform. Its founding date was the 15th of March, 2021.
BTCX Fees and Returns
The BTCX comes with a management fee of 0.40%. It boasts of the lowest fee compared to the other Bitcoin ETFs in Canada. Similarly, its return performance is not available due to its recent launch.
How to Buy BTCX
You can easily buy BTCX on TSX. It is also available on popular brokerage platforms such as Questrade and Wealthsimple Trade.
It is a certainty that the introduction of Bitcoin ETFs is a historic event for both the cryptocurrency and the financial market. It is an excellent way for traditional stock investors to sink their teeth into crypto assets with ease.
Nevertheless, as with all investment decisions, we recommend you do your research. That way, you can make good Bitcoin ETF investments.
Thanks for reading, please let me know your thoughts and comments below.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.