Bitcoin ETFs: What You Need to Know About Inflows, Outflows, and Price Moves The Motley Fool

This makes them seem more trustworthy to people who worry about the risks of the crypto market. A crypto ETF’s price stays close to the price of the cryptocurrency it follows. When more people want ETF shares, these institutions put money into the fund to buy the asset or contracts and create new shares. When fewer people want ETF shares, some shares are taken out of the market. The second is a futures ETF, which does not own the coins themselves but rather invests in the contracts that attempt to forecast the future value of the cryptocurrency. With institutional players like Blackrock and Fidelity entering the market, and countries like the US, Canada and Brazil leading the way, Bitcoin ETFs are becoming a significant part of the financial landscape.

What does a bitcoin ETF mean for investors?

A Bitcoin Futures ETF operates by purchasing Bitcoin futures contracts traded on regulated exchanges like the Chicago Mercantile Exchange (CME). These futures contracts are standardized agreements, and the ETF rolls over (sells expiring contracts and buys new ones) to maintain exposure to Bitcoin prices. Bitcoin is typically easier to sell off than most assets, but its ETF would likely be similar in that regard. A recent study has shown that about 78% of circulating supply of Bitcoin is illiquid—that means that investors are holding rather than actively trading it. Nonetheless, Bitcoin is still very easy to sell quickly at a reasonable price—as long as you are not using a crypto exchange with very low trading volume. Bitcoin ETFs serve as a bridge between traditional finance and cryptocurrency markets.

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The value of these ETF shares is typically satoshi nakamoto original paper tied to the price movements of bitcoin. This allows investors to invest in bitcoin's performance without dealing with the complexities of managing and securing the cryptocurrency themselves. Until now, the buying and selling of cryptocurrency was prohibited on the U.S. stock exchange. Additionally, many casual investors may be unversed in cryptocurrency and have no idea what it is or how much to buy. In addition to Bitcoin futures contracts, it may also hold cash and Treasury securities.

What Is a Bitcoin ETF?

Owning Bitcoin—and crypto in general—has several very real advantages. Firstly, it is possible to trade bitcoin without middlemen, thus having greater control over this very dynamic asset. Trading BTC can be very lucrative if you catch the right opportunity—it’s a volatile asset and offers plenty of opportunities.

Rolling of Futures Contracts

This means the share price should pretty much dance in step with Bitcoin’s going rate. To keep this link tight, these issuers often check a daily benchmark price, something like the CME CF Bitcoin Reference Rate. Sometimes, the ETF’s price might wiggle a tiny bit away from Bitcoin’s, a thing called tracking error, usually because of management fees or how to become a software engineer if things get a bit sluggish behind the scenes. Following the success of Bitcoin ETFs, the SEC approved several spot Ethereum ETFs in July 2024, allowing investors to gain direct exposure to Ethereum’s price movements. Notable among these is BlackRock’s iShares Ethereum Trust, which has attracted significant inflows, with $573 million in a single week, contributing to a total of $837 million in weekly inflows for Ethereum ETFs.

But ETFs that invest indirectly in bitcoin—such as ETFs that hold bitcoin futures—are not inferior. They are simply alternative strategies, looking to gain exposure to bitcoin in a different way. In January, the SEC formally approved exchange-traded funds linked directly to bitcoin.

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The Ontario Securities Commission approved the Purpose Bitcoin ETF, which became the first officially approved Bitcoin ETF in North America. It started trading on the Toronto Stock Exchange (TSX) on February 18, 2021, under the ticker symbols "BTCC.B" and "BTCC.U". As of April 2025, there are 11 spot Bitcoin ETFs available for trading. Instead, they can just buy an ETF from one of the many regulated asset managers that are set to go live with their own ETFs. This makes it much easier to own bitcoin, as you don't have to rely on a vulnerable piece of hardware for storage. Investors the top 10 white label crypto exchange providers in 2023 don't need to tackle the difference between "hot" and "cold" wallets, which store digital tokens.

Use for investment and status as an economic bubble

• This integration could expand the utility of ETFs beyond traditional markets, creating new opportunities for investors and institutions alike.
• The launch of bitcoin ETFs has opened up a new level of curiosity from investors, particularly those who have an existing brokerage account but don’t have crypto accounts.
• Some invest in Bitcoin futures, while others invest in Bitcoin mining stocks.
• When you invest in a spot ETF, the fund uses your money (along with other investors') to buy Bitcoin on cryptocurrency exchanges and store it securely through institutional custody services.

You may have heard the term ‘Bitcoin ETF’ floating around in recent financial news, especially with the growing popularity of Bitcoin and other cryptocurrencies. Crypto ETFs became an even bigger topic after the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission, especially the ones from famous investment managers and companies like BlackRock or Fidelity. Ethereum ETFs, which got approved in 2024, have also made their mark on the crypto market.

These ETF performance metrics don't directly affect an investor's returns. They are more closely related to measuring the quality and popularity of specific ETFs, usually compared to rival funds with similar investment goals. And when you combine the two concepts into crypto-based ETFs, there are so many dark corners and financial enigmas to explore.

• ETFs sell shares to investors on the open market and use the proceeds to build a portfolio of assets.
• Over 500 million people around the world now use cryptocurrency, with over 50% holding or investing in Bitcoin, making it the most popular cryptocurrency by far.
• This was the first Bitcoin ETF to get approved for trade in the U.S. markets — it entered the market in October 2021.

Bitcoin ETFs typically track Bitcoin's price very closely, but tracking errors can occur during extreme market conditions or high trading volumes. After all, even the best fund isn't going to perfectly track the crypto's price since there are fees built into ETFs to pay for management. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer.

There are now many Bitcoin ETFs that invest in Bitcoin itself, based on the top cryptocurrency's actual daily price movements. Some of the best Bitcoin ETFs include the iShares Bitcoin Trust, Grayscale Bitcoin Mini Trust ETF, and the Fidelity Wise Origin Bitcoin Fund. The best Bitcoin ETF to choose will depend on various factors, like the annual fee, the reputation of the investment manager and its custodian, and the fund's total investor assets under management. Bitcoin (BTC -0.21%) has been one of the most exciting investments of the 2000s. One Bitcoin was worthless when it launched in 2009, but 15 years later, its price surpassed $100,000. Now, Bitcoin exchange-traded funds (ETFs) have made it easier to invest.

Securities and Exchange Commission (SEC) approved funds based on Bitcoin's spot price in 2024. The move increased Bitcoin's price and its appeal for institutional investors. Every investor is in a unique position with their own unique investment goals and needs.

Bitcoin ETPs offer the ease of stock trading, low costs, tax efficiency, and liquidity. The amount of bitcoin represented by shares of the Trust will decrease over the life of the Trust due to sales of bitcoin necessary to pay the sponsor's fee and trust expenses. Without increases in the price of bitcoin sufficient to compensate for that decrease, the price of the shares will also decline, and investors will lose money on their investment. The liquidation of the Trust may occur at a time when the disposition of the Trust's bitcoin will result in losses to investors. The value of the shares of the Trust will be adversely affected if bitcoin owned by the Trust is lost or damaged in circumstances in which the Trust is not in a position to recover the corresponding loss.