Is Cryptocurrency ETF IBIT a Buy?

As spot Bitcoin ETFs gain traction, more and more retail investors can gain exposure to Bitcoin through their brokerage accounts, without going through the hurdles of actually holding Bitcoin.

One exchange-traded fund (ETF) that’s currently generating a lot of buzz is the iShares Bitcoin Trust (IBIT). Here’s a closer look at the IBIT ETF and why it may or may not be a good investment for you.

The iShares fund line is managed by Blackrock (BLK), the largest asset manager in the world. As of Dec. 31, 2023, Blackrock had more than $10 trillion in assets under management (AUM).

The iShares Bitcoin Trust is also the largest Bitcoin ETF by a wide margin. At the end of January, the IBIT ETF had about $20 million in AUM. Its major rival, the Grayscale Bitcoin Trust (GBTC), had an AUM of about $18.67 million. And next on the list was the Fidelity Wise Origin Bitcoin Fund (FBTC) with an AUM of 11.36 million.

But beyond AUM, the iShares Bitcoin Trust also stands out for how often it’s traded. Its daily volume is about 26 million. Compare that to about 5 million for the Grayscale Bitcoin Trust and the Fidelity Wise Origin Bitcoin Fund each.

While the IBIT ETF stands out for its backing by leading asset manager Blackrock and its sheer size in the space, it does have its drawbacks. For instance, you may be facing higher fees than other spot Bitcoin ETFs at your disposal.

The iShares fund’s expense ratio is currently a competitive 0.12%. But it could rise to 0.25% 12 months after the fee-waiver initiation date of January 11, 2024. Also, keep in mind it’ll divert to 0.25% if the fund exceeds $5 billion of the Trust’s assets prior to the end of the 12-month period.

The iShares Bitcoin ETF Trust’s fees (Assuming the upcoming 0.25%) puts it in line with other leading contenders like Fidelity’s Bitcoin ETF and WisdomTree Bitcoin ETF (BTCW).

These fees are modest, considering the average spot ETF expense ratio is 1.07%. However, you can find similar funds with lower fees like the following.

But you should also consider the IBIT’s performance as of date.

Since inception, the iShares fund has closed at a 52-week high of $41.99. The 52-week highs for the Grayscale Bitcoin ETF and the Fidelity Bitcoin ETF stand at $65.61 and $64.42, respectively.

But before you invest in any spot Bitcoin ETF, consider this.

Your holdings would be reflecting the price movements of Bitcoin, so you’d essentially be investing in this cryptocurrency. Remember that this wildly popular crypto coin has been known for its sky-piercing highs, as well as meteoric falls that can come at a second’s notice – as with the greater crypto market.

So be sure to do your due diligence before investing in a spot Bitcoin ETF or any investment directly or indirectly related to crypto, and make sure you have the risk tolerance to stomach any of the drops.

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