A Bitcoin ETF is a type of investment that allows an investor to buy bitcoin through the stock market without actually buying the coin directly.
Buying Bitcoin can also be a bit of an arduous process, which is why, if you’re considering getting into the cryptocurrency world, then looking at a bitcoin ETF is an excellent consideration.
There’s no denying that Bitcoin has taken the world by storm, with its dramatic highs and lows making headlines, and some big players in the world of finance lending it their weight.
You have one side of the fence telling you to get in and buy crypto, and the other saying it’s too volatile so stay away.
This option is only a recent phenomenon, however, and Canada is leading the way. In the span of three months, Canada went from no Bitcoin ETFs to ten by May 2021.
This presents a great opportunity and in this article, we will break down exactly what a bitcoin ETF is, what are the advantages and disadvantages, and what our top 3 Bitcoin ETFs are.
Let’s dive in…
What is a Bitcoin ETF?
First things first, what exactly is a Bitcoin ETF?
An ETF is an exchange-traded fund, and in our case here is one that is exclusively focused on bitcoin.
A Bitcoin ETF gives traders access and exposure to buying and selling bitcoin through the traditional stock exchange without having to buy the actual coin directly.
Simply put, they are an easy way for you to buy and sell Bitcoin.
ETFs are traditional financial products that are highly regulated and are traded on traditional exchanges. This means you can also buy them easily through any traditional broker like Fidelity or Interactive Brokers, to name a few.
Advantages of a Bitcoin ETF
There are a number of advantages to holding a Bitcoin ETF over Bitcoin itself:
- Bitcoin ETFs are much easier to purchase and hold
- Bitcoin ETFs hold their bitcoin in cold storage ensuring its protection from theft (hacking)
- You can hold a Bitcoin ETF in a registered account like your RRSP or TFSA
- Bitcoin ETFs are direct investments into bitcoin and your returns will match the movement of Bitcoin price action
Disadvantages of a Bitcoin ETF
Equally, there are disadvantages to consider too:
- Bitcoin and Bitcoin ETFs are incredibly volatile investments
- Bitcoin ETFs charge management fees on top of your brokerage fees
- If your primary interest in cryptocurrency and Bitcoin is its decentralized system then you lose this benefit by purchasing through an ETF
- You can’t use the Bitcoin you hold through an ETF for peer-to-peer purchases.
How to buy Bitcoin ETF in Canada
One of the great advantages of investing in Bitcoin through an ETF is that you can buy it using any one of the major investment brokers, as mentioned above. This makes them very easy to purchase, especially in comparison to buying the coin directly.
You will of course pay commissions on your trades unless you use a commission-free platform, and you will be able to manage your account directly, buying and selling with ease.
Our Top 3 Bitcoin ETF Options in Canada
- BTCC – Purpose Bitcoin ETF
Purpose Investment’s cryptocurrency ETF was created on February 18, 2021, and is traded on the TSX under three different tickers:
- BTCC (CAD and currency-hedged)
- BTCC.B (CAD and non-currency hedged)
- BTCC.U (USD and non-currency hedged)
The management fee is 1% and you can buy in both CAD and USD.
- EBIT – Evolve Bitcoin ETF
Evolve’s ETF was created on February 19, 2021, and currently trades on the TSX under two tickers:
- EBIT (CAD unhedged)
- EBIT.U (USD)
Their management fee is cheaper at 0.75% and is also available in both CAD and USD.
- BTCX – CI Galaxy Bitcoin ETF
CI’s bitcoin ETF is the most recent addition to the market of the three and was created on March 15, 2021. It trades on the TSX under two tickers:
- BTCX.B (Cad and unhedged)
- BTCX.U (USD)
CI offers the lowest management fee at 0.4% and is also available in both CAD and USD.
Performance and Returns
It’s worth noting, as you may very well be wondering, what the performance and returns of these ETFs might be.
The answer is we don’t yet know, to be honest. They are all so new that we will need to wait at least a year before we can get any sort of published performance reports from any of the ETFs.
They are, just as bitcoin is, a highly speculative investment.
Are the Bitcoin ETFs safe?
Bitcoin ETFs, like all EFTs, are carefully regulated by the appropriate Canadian authorities to make sure that your investment is professionally managed.
While Bitcoin ETFs use third parties to hold their bitcoin, most use Gemini, which is a US-regulated crypto custodian, and are very well respected with very rigorous security features.
While the actual purchase of your ETF can be considered as safe as any other ETF, it is important to remember that Bitcoin is still an incredibly volatile market and that any investment in a Bitcoin ETF is speculative. Meaning the market can move against you very quickly and very dramatically causing big losses.
It is always advised to diversify your investments and not commit more than you can afford, or more than a small portion of your total portfolio to any one investment.