| A bitcoin exchange-traded fund has been long awaited by both the crypto community and investors on Wall Street, many of whom have argued for years that approval by regulators would open up digital currencies to more mainstream investors.
And now it's here.
The ProShares Bitcoin Strategy ETF (ticker: BITO) is the first bitcoin ETF to trade in the U.S. on a regulated exchange and comes after many years of the cryptocurrency industry hoping to get one launched to provide investors easy and safe access to bitcoin exposure.
The fund tracks CME Group bitcoin futures, or contracts speculating on the future price of bitcoin, rather than the crypto itself. It was filed under mutual fund rules that SEC Chairman Gary Gensler has said provides "significant investor protections."
However, when it comes to cryptocurrencies, one of the biggest challenges for investors is not getting caught up in the hype, experts warn. So, if you've decided to invest in the cryptocurrency market, it's important — as with any other investment — to do your research before you hand over any money.
Make sure you truly understand what you're investing in. So, prior to making any investing decision, sit down and take an honest look at your entire financial situation, especially if you've never made a financial plan before. As my financially savvy dad used to say: "It's important to know what you don't actually know."
And remember, all investments, not just cryptocurrency, involve some degree of risk. So, evaluate your comfort zone in taking on risk.
If you're really interested in investing, financial experts recommend understanding the potential risks surrounding a futures-based bitcoin ETF before parting with your money. There are a few things to consider.
First, it's important to understand that investing in a futures-based bitcoin ETF is not a direct investment in bitcoin.
A futures-based ETF tracks futures contracts, rather than the price of the bitcoin itself. Therefore, the price of the ETF will not match the price of bitcoin.
The more you know, the better you'll feel about investing.
Moreover, it costs more to own funds over individual assets. But some investors are willing to pay more for an ETF's institutional level liquidity, custody and execution versus managing the currency themselves, experts say.
Some advisors see digital currencies as a speculative asset and say betting on prices of futures contracts can be unpredictable.
"It's just the ultimate risk that you would ever take," said certified financial planner Jordan Benold, partner at Benold Financial Planning in Prosper, Texas, explaining how the volatility of bitcoin paired with futures contracts may be a gamble. "You're really into high-stakes poker at this point."
For more cool stuff like this, check out CNBC's Financial Advisor Hub and CNBC + Acorns Invest in You: Ready. Set. Grow. |
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