For Australian investors looking to participate in the Bitcoin market via a more familiar investment structure, exchange-traded funds (ETFs) offer a convenient and regulated way to gain exposure. These crypto ETFs come in various forms, mainly categorized as futures and spot ETFs, each with its characteristics and ways of reflecting Bitcoin’s market movements.
Futures ETFs
Futures-based Bitcoin ETFs invest in futures contracts rather than holding the cryptocurrency directly. These contracts speculate on the future price of Bitcoin, providing an investment pathway tied to its future market expectations rather than its current price. This approach can sometimes lead to discrepancies between the ETF’s performance and the actual spot price of Bitcoin, especially in volatile market conditions.
However, futures ETFs offer a way to invest in Bitcoin’s potential without directly engaging with the cryptocurrency, adding a layer of abstraction that can appeal to those cautious about direct crypto investments.
Spot ETFs
In contrast, spot Bitcoin ETFs aim to track the current market price of Bitcoin. They provide a more direct exposure to Bitcoin’s price movements by holding the cryptocurrency directly. Spot ETFs offer a closer alignment with the actual performance of Bitcoin, making them a preferred choice for investors seeking an investment that mirrors the cryptocurrency’s real-time value.
Major institutions like BlackRock, WisdomTree, and ArkInvest currently have pending applications for spot Bitcoin ETFs. If approved, these offerings could further diversify the available Bitcoin ETFs, potentially providing more direct and varied exposure to Bitcoin for investors.
Pro Tip
Spot ETFs offer a closer alignment with the actual performance of Bitcoin, making them a preferred choice for investors seeking an investment that mirrors the cryptocurrency’s real-time value
On top of this, if the ETFs are approved, these institutions will need to buy significant quantities of BTC to hold as backing due to how spot ETFs work. Many investors speculate that this could drive substantial demand for BTC, potentially increasing the price in the future.
How to Invest in a Bitcoin ETF
To invest in a Bitcoin ETF, you need a brokerage or online share trading account that gives you access to the exchanges your desired ETF trades on. Through this account, they can buy and sell ETF shares just as they would with traditional stocks. This process simplifies the investment in Bitcoin, avoiding the need for digital wallets and the associated security concerns.
In Australia, investors can access a variety of Bitcoin ETFs. For instance, the Global X 21Shares Bitcoin ETF (EBTC) and Ethereum ETF (EETH) available on Cboe Australia (CXA) track the prices of Bitcoin and Ethereum, respectively. These ETFs, particularly the EBTC, align closely with the concept of spot ETFs, providing exposure to the price movements of the respective cryptocurrencies.
Alternatively, for investors looking to gain exposure to the broader crypto industry, the BetaShares Crypto Innovators ETF (CRYP) focuses on companies involved in crypto, providing exposure to the sector without direct investment in cryptocurrencies. CRYP is available on the Australian Securities Exchange (ASX), which most brokerage or online share trading accounts will provide access to in Australia.
Whether futures-based or spot-based, Bitcoin ETFs offer diverse ways for investors to engage with the Bitcoin market. While futures ETFs provide a degree of separation from direct Bitcoin price movements, spot ETFs offer a more immediate reflection of Bitcoin’s market value. Each ETF type has pros and cons, and the choice depends on the individual investor’s strategy, risk tolerance, and preference for direct or indirect exposure to Bitcoin’s performance.
This familiar (and regulated) investment route is attractive for those who prefer the traditional stock market structure but want exposure to Bitcoin and other cryptocurrencies.