The fourth Bitcoin (CRYPTO: BTC) halving is in the books, and the world hasn’t ended. Near 8 p.mp ET on Friday, April 19, miners processed the last data block of the third halving cycle, pocketing 6.25 Bitcoins as a reward. A few minutes later, the first post-halving data block was rewarded with 3.125 digital coins.
Growth investing genius Cathie Wood expects the halving to unlock a ton of value for Bitcoin investors. But the leading digital currency’s price has barely moved since last Friday, rising just 4% in three days. And this halving is different from the rest because investors have access to Bitcoin-based exchange-traded funds (ETFs) for the first time.
Is this the time to jump into Bitcoin ETF investing with both feet? Let’s take a look.
The price-boosting effect of Bitcoin halvings
Here’s how Cathie Wood characterized the fourth Bitcoin halving three months ago:
“The rate of growth in supply is going to be cut in half to just under 1% per year,” she said in a video interview. “If you compare this to gold, the gold supply has increased on average roughly 1% per year. Bitcoin’s supply growth is going to drop below that.”
In other words, Bitcoin has been a more scarce asset than gold since last Friday. There will never be more than 21 million Bitcoins on the market, thanks to the strictly planned cycles of halving the miner rewards every 210,000 blocks, or roughly every four years. 93.7% of the blocks have already been created, and that ratio will rise to 96.9% before the next halving. With limited supply and rising demand, this digital asset should gain value in the long run.
And it makes more sense than ever to call Bitcoin “digital gold.”
Why Bitcoin ETFs make sense to me
Many investors are dragging their feet on the Bitcoin idea. Some aren’t sure that cryptocurrencies will become more important over time. Others aren’t sure that Bitcoin would be the right choice in a crypto market with thousands of smaller names. More than a few just don’t want to deal with the intricacies of opening accounts with a solid cryptocurrency exchange, learning how to execute crypto trades, and deciding where to store their digital assets.
The new ETFs can erase some of these concerns. Bitcoin can still be replaced by smaller, faster, hungrier crypto teams with superior technical designs. The world might continue to shrug at the usefulness of encrypted transaction ledgers on a global scale. An ETF can’t shield you from these potential downsides. But you can buy and sell them much like ordinary stocks, using the same stock-trading or retirement investment account you’re using for stock trades.
I can’t guarantee that cryptocurrencies will change the world, or that Bitcoin will continue to lead the charge for years to come. That being said, I do expect digital payments and secure digital management of various assets to slide into the global spotlight over time.
Bitcoin set the stage for this generational sea change, and thousands of would-be challengers have yet to dethrone the original king. Bitcoin accounts for more than half of the total crypto market’s value, and its dominance has increased for more than a year.
Furthermore, based on previous history and the basic mechanics of Bitcoin’s economic model, the halving should drive Bitcoin prices higher over the next 12 to 18 months.
Why Bitwise is my favorite spot Bitcoin ETF
So I’m investing in the crypto revolution in several ways, including a small bet on actual Bitcoin in a Coinbase (NASDAQ: COIN) account. But I also own some shares of Grayscale Bitcoin Trust (NYSEMKT: GBTC) and Bitwise Bitcoin ETF (NYSEMKT: BITB) in ordinary stock broker accounts.
Bitwise is my preferred spot Bitcoin ETF for a couple of reasons.
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I can buy it in my IRA account, which isn’t open to direct cryptocurrency transactions.
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Bitwise shares some of the fund’s profits with Bitcoin’s developer community, so my modest investment gets to help the crypto market as a whole.
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At 0.2%, the Bitwise Bitcoin ETF’s sponsor fees are the lowest among the 11 Bitcoin ETFs on the market today.
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This fund has $2.2 billion of net assets under management, which means that Bitwise’s promotional fee discount is making a significant difference. iShares Bitcoin Trust (NASDAQ: IBIT) and ARK 21Shares Bitcoin ETF (NYSEMKT: ARKB) have already deactivated their launch-day fee discounts.
Why I’m stuck with some Grayscale Bitcoin ETF
I’m stuck with some Grayscale shares for the foreseeable future, since I bought them in an ordinary investment account without the tax shelter of an IRA plan.
Lowering the annual fees from 1.5% to 0.2% while supporting the Bitcoin community is enough motivation to steer future investments into the Bitwise ETF, and I already converted the Grayscale funds I used to hold in my IRA account.
But the difference isn’t big enough to outweigh the capital gains taxes I’d pay on my non-IRA Grayscale Bitcoin ETF investment. And it’s up by 72% in about five months, so it would be a painful short-term gain for tax purposes.
No thanks, I’ll just hold on to Grayscale’s high fees for now. Twist my arm, why don’t you?
The Bitcoin halving’s market-boosting effect is long-term, and it’s not too late to take advantage of the fourth halving. So, if you agree that Bitcoin seems like a worthwhile investment, I suggest grabbing some Bitwise Bitcoin ETF shares before the fee discount expires in July. Grayscale was a helpful tool in the past, but its high fees make it less useful today.
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Anders Bylund has positions in Bitcoin, Bitwise Bitcoin ETF Trust, Coinbase Global, and Grayscale Bitcoin Trust (BTC). The Motley Fool has positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.
Should You Buy a Spot Bitcoin ETF After the Halving? was originally published by The Motley Fool