Bitcoin
Are Spot Bitcoin ETFs Millionaire Makers?
Throughout its 15-year history, Bitcoin (CRYPTO:BTC) is up over 18,000% and made many millionaires along the way. But what about spot Bitcoin ETFs?
Approved by the U.S. Securities and Exchange Commission in January 2024, the 11 spot Bitcoin ETFs now available to investors make investing in Bitcoin as easy as buying shares through your favorite brokerage. Gone are the days of having to navigate complex crypto exchanges and digital wallets.
Now, investors can give their portfolios exposure to Bitcoin’s unique millionaire-making capabilities by simply purchasing an exchange-traded fund. But before you do, it’s crucial to understand what sets these ETFs apart 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
Because spot Bitcoin ETFs track the price of Bitcoin, in the same way that gold ETFs track the price of gold, the chances of achieving millionaire status depend on Bitcoin’s ability to continue growing. Fortunately, its inherent characteristics should make the cryptocurrency more valuable over time.
While exploring Bitcoin’s unique qualities 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, with many analyzes suggesting that it is in a similar position to the early days. from Internet. Well-known Bitcoin analyst Willy Woo sees as much wealth creation value in this moment as Internet investors experienced after the turn of the millennium.
Furthermore, now that spot Bitcoin ETFs have been approved, deep-pocketed institutional investors who were previously excluded from the Bitcoin market have entered the game. This means that even more pressure will be placed on the finite supply of Bitcoin.
While purchasing Bitcoin is the best way to capitalize on its future growth, ETFs are still a viable option to help you achieve millionaire status. However, when doing this, there are a few other things to keep in mind.
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Understanding the Effect of Fees
It may seem simple. If Bitcoin rises, ETFs will also rise. However, there is an additional factor that comes into play: fees.
Each Bitcoin ETF is provided by a company. And because 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 forgotten.
Today, the 11 different spot Bitcoin ETFs trade at a variety of rates. The lowest is Franklin Templeton Digital Holding Trust (NYSEMKT: EZBC) by 0.19%. The highest is Bitcoin Trust in Grayscale (NYSEMKT:GBTC) by 1.5%.
Let’s use a hypothetical scenario to compare the effect these fees have. Suppose Bitcoin produces a 30% annualized return, a mark that history has proven to be the base case, and our hypothetical investor invests $1,000 every year in these ETFs.
The Franklin Templeton ETF would make our investor a millionaire after 22 years. On the other hand, the grayscale investor would take 24 years. This may not seem like much, but eventually the effect becomes more evident. In year 30, our Franklin Templeton investor would have almost $11 million, while the Grayscale ETF holder would have about $8 million, all because of a 1% difference in fees.
Striking a Balance with AUM
Finding an ETF with the lowest possible fees is the first step when trying to maximize your Bitcoin-fueled millionaire dreams. However, there is another factor that needs to be considered – assets under management (AUM).
Funds with higher AUM tend to have greater liquidity, that is, there are more buyers and sellers in the market, making it easier to buy or sell shares without significantly affecting the price. This liquidity can be particularly beneficial in times of market volatility when rapid trade execution is essential.
Additionally, ETFs with larger AUM often have more resources at their disposal, allowing them to implement sophisticated trading strategies and employ experienced portfolio managers. These features can increase the fund’s ability to accurately track Bitcoin’s underlying price movements, reducing tracking errors and ensuring the ETF closely mirrors Bitcoin’s performance.
Of the 11 spot Bitcoin ETFs, the Grayscale Bitcoin Trust leads with over $18 billion in AUM. However, it has the highest rates. Providing a more reasonable balance is BlackRock’s goal iShares Bitcoin Trust (NASDAQ: IBIT), with $17.3 billion in AUM and a yield of 0.25%. There is also the Fidelity Wise Origin Bitcoin Fund (NYSEMKT: FBTC), with AUM of $9.5 billion and a similar 0.25% fee that is currently waived but will take effect in August of this year.
Becoming a millionaire
In the investment world, few assets compare to the enthusiasm and potential of Bitcoin. As the leader of the crypto asset class, Bitcoin is well positioned to ride the wave of growing interest in digital assets across the world.
Some experts predict that its value could skyrocket to more than US$1 million before 2030, as new demand competes for its finite supply. Spot Bitcoin ETFs can help investors realize their dreams of becoming millionaires in a simple and straightforward way. Just remember to strike a balance between fees and AUM.
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RJ Fulton has positions in Bitcoin and iShares Bitcoin Trust. The Motley Fool has positions and recommends Bitcoin. The motley fool has a disclosure policy.
Are Spot Bitcoin ETFs Millionaire Makers? was originally published by The Motley Fool