A One-Year Review of the Bitcoin ETF
Main Idea: The Bitcoin ETF offers a more structured and accessible way to invest in this rapidly growing asset. However, it still carries many of the same risks as the underlying cryptocurrency. Despite a year of over 100% growth, investors should remain cautious while keeping an eye on its long-term potential.
A fair disclosure at the outset here. This article represents my views of Bitcoin and should not be taken as a recommendation or advice. Consult with your financial advisor for advice specific to you. Second, most of the article will use IBIT (Blackrock's Bitcoin ETF) as example.
Bitcoin began during the Great Financial Crisis back in 08-09.
After over a decade of tumultuous and volatile performance, it became a national mystery for its ability to earn (and lose) money almost overnight.
Waffle House workers quit on the spot, heavy internet speculators became multi-millionaires in a matter of months, and the world was still left baffled at this investment that made no sense, and yet was performing these miracles.
Today, there is still much cloudiness around the future of Bitcoin, but with wider adoption and more serious players entering the game, one thing we can no longer say is that it's a fad.
BlackRock, VanEck, Grayscale, and other investment giants have not only dipped their toe in the murky waters of crypto fountain, but put their whole left leg in.
In January of last year, the first Bitcoin ETFs were launched. (There were a few others started previously, but none that gave access to BTC like these)
All (11) ETFs began trading on Jan. 11, 2024. SEC Chair Gary Gensler released a warning along with the approval:
"While we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin. Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto."
So basically...do what you want, and leave us out of it while you're at it.
What Is Bitcoin Again?
As noted by Grayscale's official offering site:
Bitcoin is a digital asset that is created and transmitted through the operations of the peer-to-peer Bitcoin Network, a decentralized network of computers that operates on cryptographic protocols. The Bitcoin Network allows people to exchange tokens of value, Bitcoins, which are recorded on a public transaction ledger known as a Blockchain.
Did that help you out? Me neither.
Put more simply:
Bitcoin is a type of digital currency that is created and exchanged using a system called the Bitcoin Network.
This network is made up of many computers working together without a central authority, using secure technology called cryptography.
The network lets people send and receive Bitcoins, which are like digital tokens of value. All transactions are recorded on a public ledger called the Blockchain.
Bitcoin can become securitized through financial products like ETFs, which allow people to invest in Bitcoin indirectly by buying shares that track its value, making it easier and more accessible for traditional investors.
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Now What About the ETF?
I'm still cautious about the ETF, even though it is a step in the right direction. Why?
All of that said, at the end of the day this is still invested in Bitcoin - shocker.
It doesn't matter if we add a middle man between us and this volatile investment. You could add a thousand middle men (who would then be happy to take a fee for doing so of course), and the end result is still based on the holdings of that investment.
CONCLUSION
Bitcoin (and other crypto) is a fascinating investment. It's terrifying for sure, but fascinating.
I'm not going to tell you to invest in it, just as I won't tell you to not invest in it.
That's right, I've mastered the art of sitting on the fence in true Dwight Schrute fashion.
Also because compliance forces me to.
Final thought is to invest in a manner that fits what you're comfortable with. If you have decades ahead of you to invest, you're going to think differently than someone in retirement.
In a similar way, there are many ways to win the game.
You don't have to take huge risks in order to get to where you want to go, you merely have to be able to live with the consequences of whatever you decide to do, because they're going to show up good or bad.
Ultimately, I think the Bitcoin ETF has made investing in Bitcoin more structured and safe, but the inherent risks that come along with Bitcoin still exists...an inherent risk from a product that still has no inherent value to it.
Okay that's it for today. We'll see you next Tuesday!
Follow Up to Read or Watch: If you'd like to see IBIT for yourself, here is a link. Also, a quick video that further explains what a Bitcoin ETF is from a technical level.
Action Item: Be careful researching anything on Bitcoin online, it brings out some of the most potent speculators who have nothing to lose by their bold claims and promises. Always invest with your own goals, limitations, and timeline in mind.
My name is Jordan McFarland and I'm a CERTIFIED FINANCIAL PLANNER? at SageSpring Wealth Partners in Dallas, TX.
My goal with these brief articles is not to make you an expert, but get you thinking about ways you can optimize your finances and get ahead for tomorrow.
If any questions or thoughts come up during your reading, you can email me at [email protected].
Unfortunately, I must keep these articles rather vanilla and short in order that I do not trip any compliance wires. I'd be happy to meet with you to hear about your specific goals when the time comes.
ETFs still carry risks related to custodial security and potential hacking, which could impact investors indirectly. This content reflects the opinions of the author and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as financial, legal, tax, or investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not indicative of future results. All investing involves risk, including the potential for loss of principal. The information contained in the commentaries is derived from sources deemed to be reliable, but its accuracy and completeness cannot be guaranteed. This material does not have regard to specific investment objectives, financial situation, or the particular needs of any specific reader. Any views regarding future prospects may or may not be realized. Asset allocation nor diversification guarantees a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.