3 Reasons Why This Cryptocurrency ETF Could Be Right For You

If you are thinking of investing in Bitcoin (BTC -2.78%)now you have a lot of options when it comes to exchange traded funds (ETFs). In fact, there are now two dozen different ETFs that invest in Bitcoin, either through direct Bitcoin holdings or the use of futures contracts. The choice of which to choose can seem overwhelming at first.

A clear standout is the new iShares Bitcoin Trust (IBIT -0.15%)which began trading in January. While it’s still relatively new and doesn’t have the track record one would normally look for in a traditional ETF, there’s a lot to like. Here’s why the iShares Bitcoin Trust might be right for you.

Exposure to Bitcoin’s Growth Potential

The iShares Bitcoin Trust is a spot Bitcoin ETF, meaning it buys Bitcoin directly on the spot cryptocurrency market. It does this without the need for complex derivatives such as futures, forwards or swaps. This is what sets iShares Bitcoin Trust apart from all other Bitcoin ETFs that existed before January 2024.

Thus, the iShares Bitcoin Trust provides an easy and convenient way to gain exposure to the growth potential of Bitcoin. You no longer need to open an account with a cryptocurrency exchange or create your own blockchain wallet. You simply buy the ETF and let it do all the heavy lifting.

Over the long term, the performance of the iShares Bitcoin Trust should mirror the performance of Bitcoin on a 1:1 basis. In other words, if Bitcoin goes up 50% in a year, then this ETF should also go up 50% in a year.

This is important because over the past decade, Bitcoin has been one of the best performing assets in the world. In fact, in seven out of the last 10 years, Bitcoin has been the best performing asset. So if you’re looking for a way to boost your portfolio’s performance, it’s worth considering adding even a small allocation to Bitcoin through this ETF.

Of course, past performance is no guarantee of future performance. And Bitcoin can experience very severe declines. However, many industry analysts are convinced that Bitcoin’s next decade can be as impressive as its first decade. For example, Cathie Wood of Ark Invest believes that the price of Bitcoin could rise to $3.8 million by the year 2030. Michael Saylor, founder and executive chairman of MicroStrategybelieves that the price of Bitcoin could rise to $13 million by the year 2045.

Unique diversification benefits

The iShares Bitcoin Trust also offers important portfolio diversification benefits. This might sound counterintuitive at first, given that this ETF only invests in one asset: Bitcoin. Instead, most ETFs invest in a wide range of stocks to provide diversification.

In this case, the diversification comes from the unique properties of Bitcoin, which historically have not been correlated with other assets. In short, Bitcoin can zig when other assets rise. Even when the overall market may underperform, Bitcoin can still shine. Of course, there will be periods when Bitcoin’s correlation with other asset classes may increase, but these are likely to be short-lived.

Image source: Getty Images.

Actually, BlackRock (BLK -0.40%)the $10 trillion asset management company behind the iShares Bitcoin Trust, recently published a white paper on Bitcoin’s unique diversification benefits. One key, BlackRock says, is that Bitcoin is much more insulated from the kinds of macroeconomic factors that influence other asset classes. As a result, Bitcoin can become a safe haven asset during times of economic uncertainty.

Low costs and convenience

The final key selling point for the iShares Bitcoin Trust is that the cost of holding Bitcoin is cheaper than if you had purchased it directly through a cryptocurrency exchange. This is largely due to the fact that annual expenses for this ETF are only 0.25%. It’s low by ETF standards (which can sometimes be higher than 1%).

Just as importantly, expenses for the iShares Bitcoin Trust are competitive with other spot Bitcoin ETFs. In fact, all of the new spot Bitcoin ETFs have expense ratios ranging from 0.19% to 0.30%. So even if you pride yourself on being a bargain hunter, it will be difficult to find significant cost savings by choosing another spot Bitcoin ETF.

Is This The Best Bitcoin ETF?

For me, the factor that tips the scales in favor of the BlackRock ETF is its size. This makes sense, of course, since BlackRock is the world’s largest asset manager and iShares is a trusted name for ETF management. So it’s no surprise that the iShares Bitcoin Trust is the largest of the new spot Bitcoin ETFs, with over $17 billion in assets under management. As a result, it has become the benchmark fund for the emerging Bitcoin ETF industry.

There’s a lot to like about the new iShares Bitcoin Trust. It gives you exposure to Bitcoin’s growth potential while also providing important diversification benefits. It makes buying Bitcoin as easy and convenient as buying your favorite tech stocks.

If you’re optimistic about Bitcoin’s long-term potential and are willing to put up with some volatility along the way, then you might want to consider adding the iShares Bitcoin Trust to your portfolio.