Pros of investing in a bitcoin ETF:
- Exposure to bitcoin
- No wallets or private keys to deal with
- Funds managed safely in cold storage
- Easy to buy/sell
- Keeps your investments in one place
- Eligible in tax-free and registered accounts (TFSA, RRSP)
- Tax advantages
Cons of investing in a bitcoin ETF
- High management fees (up to 1%)
- Only tracks bitcoin
- You won’t have custody of the bitcoin
- You must put trust in the asset manager and your brokerage
- Volatile asset
What is a bitcoin ETF?
A bitcoin ETF is a managed bitcoin fund that you can buy shares in. Unlike other ETFs, you are not buying bitcoin stock in Canada because bitcoin is not a stock. Instead, the fund will buy actual bitcoin and store it safely in cold storage. Each share represents a unit of this bitcoin. When you buy shares in a bitcoin ETF, you are buying into a portion of the bitcoin owned and held by the asset manager. You do not have custody of the bitcoin itself, so you cannot transfer it to a private wallet.
How to buy a bitcoin ETF in Canada?
You can buy a bitcoin ETF in Canada on popular brokerages Wealthsimple Trade and Questrade. You can buy shares in a bitcoin ETF in your TFSA, RRSP, and personal accounts.
What’s the difference between an actual bitcoin and a bitcoin ETF?
When you buy bitcoin from a crypto exchange, you can withdraw the bitcoin to a private wallet giving you sole custody of it. You are buying actual bitcoin and storing it yourself. With a bitcoin ETF, you are buying shares in the fund. The fund manager holds and manages the bitcoin for you and everyone else invested in the fund. You cannot have access to bitcoin directly.
Is it worth investing in a bitcoin ETF?
A bitcoin ETF is worth investing in if you want to invest in bitcoin but don’t want to deal with the hassle of private wallets, navigating exchanges, and managing security yourself. A bitcoin ETF is also worth it if you’d like exposure to bitcoin in your tax advantageous accounts such as your TFSA or RRSP.
A Canadian bitcoin ETF may not appeal to everyone because the management fees are high and you don’t have custody of your bitcoin. However, bitcoin ETFs are great for people who want to invest in bitcoin but don’t understand how to use crypto exchanges or wallets. A crypto ETF in Canada gives people who don’t understand too much about crypto the opportunity to invest in it. A bitcoin ETF can also offer tax-free gains if you buy shares in your TFSA, which is great for crypto investors looking to save on tax. While a bitcoin ETF is a good investment opportunity, you should be aware that investing in a bitcoin ETF is the same as investing in the asset itself. If the price of bitcoin plummets, so will your bitcoin ETF investment. Bitcoin is highly volatile and you should use caution when investing.