Over the course of its 15-year history, Bitcoin (CRYPTO: BTC) is up more than 18,000% and has made plenty of millionaires along the way. But what about spot Bitcoin ETFs?
Approved by the U.S. Securities and Exchange Commission in January 2024, the 11 spot Bitcoin ETFs now available to investors make investing in Bitcoin as easy as buying a stock through your favorite brokerage. Gone are the days of having to navigate complex crypto exchanges and digital wallets.
Now investors can give their portfolios the exposure to Bitcoin’s unique millionaire-making abilities by simply buying an exchange-traded fund. But before doing so, it’s crucial to understand what makes these ETFs differ from each other — and which one is the best option to help you reach millionaire status as Bitcoin continues its journey of price appreciation.
Bitcoin’s growth trajectory and the spot ETFs
Since the spot Bitcoin ETFs track Bitcoin’s price, in the same way that gold ETFs track the price of gold, the chances of reaching millionaire status rely on Bitcoin’s ability to continue growing. Fortunately, its inherent characteristics should make the cryptocurrency more valuable with time.
While an exploration of Bitcoin’s unique qualities that promote price appreciation over time are a topic for another day, investors should keep in mind that Bitcoin is still in its early stages of adoption, with many analyses suggesting it is in a similar position to the early days of the internet. Well-known Bitcoin analyst Willy Woo sees as much wealth-creating value in this moment as internet investors experienced after the turn of the millennium.
In addition, now that the spot Bitcoin ETFs have been approved, deep-pocketed institutional investors that were previously sidelined from the Bitcoin market have entered the game. This means that even more pressure will be placed on Bitcoin’s finite supply.
Even though buying Bitcoin itself would be the best way to capitalize on its future growth, the ETFs are still a viable option to help you reach millionaire status. However, if doing so, there are a few other things to keep in mind.
Understanding the effect of fees
It might sound simple. If Bitcoin goes up, then so will the ETFs. However, there is an additional factor that comes into play — fees.
Each Bitcoin ETF is provided by a company. And since these firms are in the money-making business, they charge fees for their services. These fees may seem small, but for the investor aiming to become a millionaire, they can’t be overlooked.
Today, the 11 different spot Bitcoin ETFs trade with a range of fees. The lowest is Franklin Templeton Digital Holding Trust (NYSEMKT: EZBC) at 0.19%. The highest is Grayscale Bitcoin Trust (NYSEMKT: GBTC) at 1.5%.
Let’s use a hypothetical scenario to compare the effect these fees have. Assume Bitcoin produces an annualized return of 30%, a mark that history has proven to be the base case, and that our hypothetical investor invests $1,000 every year into these ETFs.
The Franklin Templeton ETF would make our investor a millionaire after 22 years. On the other hand, it would take the Grayscale investor 24 years. Maybe that doesn’t sound like much, but eventually the effect becomes more glaring. By year 30, our Franklin Templeton investor would have nearly $11 million while the Grayscale ETF holder would be sitting at roughly $8 million, all because of a 1% difference in fees.
Striking a balance with AUM
Finding an ETF with the lowest possible fees is step one when trying to maximize your Bitcoin-fueled millionaire dreams. However, there is one other factor that needs to be considered — assets under management (AUM).
The funds with a greater AUM tend to have greater liquidity, meaning there are more buyers and sellers in the market, making it easier to buy or sell shares without significantly affecting the price. This liquidity can be particularly beneficial during times of market volatility when quick execution of trades is essential.
Moreover, ETFs with larger AUM often have more resources at their disposal, allowing them to implement sophisticated trading strategies and employ experienced portfolio managers. These resources can enhance the fund’s ability to accurately track Bitcoin’s underlying price movements, reducing tracking errors and ensuring that the ETF closely mirrors the performance of Bitcoin.
Out of the 11 spot Bitcoin ETFs, the Grayscale Bitcoin Trust leads the way with more than $18 billion in AUM. However, it has the highest fees. Providing a more reasonable balance is BlackRock’s iShares Bitcoin Trust (NASDAQ: IBIT), with $17.3 billion in AUM and a 0.25% fee. There is also the Fidelity Wise Origin Bitcoin Fund (NYSEMKT: FBTC), with $9.5 billion AUM and a similar 0.25% fee that is currently waived but will kick in this August.
Becoming a millionaire
In the world of investing, few assets compare to the excitement and potential of Bitcoin. As the leader of the cryptocurrency asset class, Bitcoin is well-positioned to ride the wave of increasing interest in digital assets worldwide.
Some experts predict its value could skyrocket to over $1 million before 2030 as new demand competes for its finite supply. Spot Bitcoin ETFs can help investors achieve their dreams of becoming millionaires in a simple and straightforward fashion. Just remember to strike a balance between fees and AUM.
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RJ Fulton has positions in Bitcoin and iShares Bitcoin Trust. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Are Spot Bitcoin ETFs Millionaire Makers? was originally published by The Motley Fool