Curious about Bitcoin ETFs? Read the pros and cons of Bitcoin ETF's in Canada.
How ETFs Work:
An ETF is a fund that trades on the stock market, and is tracked to another security or commodity. ETFs are usually baskets of many stocks that you can purchase in one transaction through your broker. There are ETFs for stocks in the same sector (like a technology ETF), indexes (like the S&P500), foreign currencies, commodities and more. A Bitcoin ETF is tracked to the price of BTC, so investors gain exposure to the asset, without actually having to hold Bitcoin themselves.
How to buy an ETF:
Many firms have tried to create a Bitcoin ETF for years, but continually ran into regulatory issues. This year, several were launched in Canada, making them the first in North America. In Canada, investors can purchase a Bitcoin ETF through their online broker just like a regular stock.
Bitcoin vs Bitcoin ETFs
There can be advantages to owning a Bitcoin ETF, but it is important to note that it's not the same as owning actual Bitcoin. Depending on your individual interest in crypto and DeFi, owning your own BTC might make more sense for you. Here are the pros and cons:
Pros of Bitcoin ETFs:
A Bitcoin ETF allows you to dabble in crypto without having to commit to storing and managing the security of your funds in a crypto wallet. This can be appealing for institutional investors or those with limited knowledge of password and internet safety.
As with all traditional investments, you can also hold them in your RRSP or TFSA for tax purposes.
Cons of Bitcoin ETFs:
Bitcoin ETFs cannot be traded for other cryptocurrencies. So, if you're looking into any other cryptocurrencies besides BTC, it might make sense to own the real thing.
The purchase of a Bitcoin ETF does not occur on the blockchain. This is something to consider if decentralization and participating in DeFi is important to you.
Your funds can be subject to high management fees (some ETFs charge up to 1%).
Your trades are constrained to regular day trading hours, unlike the 24/7 crypto markets.
Now it's up to you! Consider your individual trading strategy to see if an ETF interests you, or if you'd rather buy BTC directly from Newton.
This article is for informational purposes only and does not constitute investment, financial, or legal advice. Cryptocurrencies and blockchain-based assets are highly speculative, subject to significant risks including price volatility, regulatory uncertainty, and potential total loss of investment. Crypto assets are not insured by the Canada Deposit Insurance Corporation (CDIC). Cryptocurrencies and stablecoins may be considered securities or derivatives under Canadian law, subject to CSA and CIRO oversight. Consult a qualified financial or legal professional before making investment decisions. No securities regulatory authority has expressed an opinion about any of the crypto assets made available on the Newton’s platform, including any opinion that a crypto asset is not a security and/or derivative. This blog may contain links to other websites for informational purposes or for your convenience. We do not control the linked websites or the content provided through such websites, and we have not reviewed, in their entirety, such websites. Your use of linked websites is subject to the privacy policies and terms of use established by the specific linked website, and we disclaim all liability for such use. The fact that we offer such links does not indicate any approval or endorsement by us of any linked website or any material contained on any linked website, and we disclaim any such approval or endorsements.
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