If you’re looking into how to invest in cryptocurrency without actually purchasing tokens, you’ve likely heard the term Crypto ETF. This guide provides a step-by-step introduction to Crypto ETF products, such as how they function, their benefits, and getting started.
What Is a Crypto ETF?
Let’s begin with a simple introduction: Crypto ETF is short for Crypto Exchange-Traded Fund. It is an investment fund that mirrors the price of one or more cryptocurrencies and trades on regular stock exchanges—same as stocks.
Rather than owning Bitcoin or Ethereum directly, you can invest in a Crypto ETF, and your funds will track the market price of those coins, without having to deal with wallets and private keys.
How Do Crypto ETFs Work?
A Crypto ETF either:
- Remains in actual cryptocurrency (a physically-backed ETF), or
- Follows the price using futures contracts (a futures-based ETF).
The ProShares Bitcoin Strategy ETF (BITO), for instance, doesn’t hold Bitcoin outright—it follows Bitcoin futures listed on the CME (Chicago Mercantile Exchange).
Investors purchase shares of these ETFs through their usual brokerage accounts, the same as if they were buying a stock or mutual fund.
Why Are Crypto ETFs So Popular?
Several reasons why ETFs are becoming increasingly popular for crypto exposure:
- Regulation: ETFs function under conventional financial regulation.
- Accessibility: No need for a crypto wallet; just use your stockbroker.
- Diversification: Certain ETFs hold several cryptocurrencies.
- Liquidity: Buy/sell ETF shares easily within market hours.
If new to investing, an introduction to Crypto ETF investing is a safer and more comfortable entry point than purchasing coins on a crypto exchange.
Risks You Should Know
Similar to all investments, Crypto ETFs have risks:
- Market Volatility: Crypto markets remain very volatile.
- Tracking Errors: Certain ETFs don’t perfectly track the price of the underlying asset.
- Futures Risk: Futures-based ETFs might act differently than anticipated.
- Before investing, always review the prospectus of the ETF and know if it’s secured by underlying crypto or futures contracts.
Examples of Popular Crypto ETFs
A few examples of compliant crypto ETFs are:
- BITO (ProShares Bitcoin Strategy ETF)
- BTCE (ETC Group Physical Bitcoin)
- BLOK (Amplify Transformational Data Sharing
- ETF – invests in blockchain stocks)
Remember, ETFs are available based on your country’s laws. The U.S. SEC has just approved additional Bitcoin ETFs, and Ethereum ones are pending review.
How to Invest in a Crypto ETF
Here’s how to get started as a beginner:
- Open a brokerage account (e.g., Robinhood, Fidelity, eToro)
- Look up available crypto ETFs by ticker symbol
- Assess the fund’s approach, expense ratio, and performance
- Purchase shares during normal market hours
- Keep an eye on your investment like you do with stocks
- No blockchain or digital wallet expertise required!
Last Thoughts: Is It for You?
This introduction to Crypto ETF investing provides you with a regulated, simplified means of entering the world of crypto without having to delve into technical intricacies. For many first timers, it’s a wise starting point—particularly if you don’t want to handle crypto yourself.