Shall we ruminate on Bitcoin? It’s been kicking up a storm and has firmly put down roots in the financial landscape. But, as it goes with trendsetters, it’s taken up a high octane hobby – a 100m dash in the stock market, up and down, and round and round. Not everyone’s got the stomach for it, but the silver lining is, you don’t have to buy the beast to feel the wind in your hair.
While cryptocurrencies have their fan club, they’ve got the critics too, mostly due to their maddeningly inconsistent value. So, if you want to dip your toes into the crypto pool, but your investments are still learning to swim, advisors recommend keeping these not-so-stable assets to less than 10% of your total investments. Feeling adventurous?
One of the wildcards in this scene is the price, which behaves like a roller coaster ride. In the early months of 2021, Bitcoin’s price sailed twice as high, but just like that unpredictable ride, it dropped by 25%, just when you were enjoying the view.
Despite crossing the trillion-dollar mark in market value, you have to play ‘guess the asset’ with Bitcoin — a game that’s ongoing, with no clear winner. Some folks equate Bitcoin to shiny gold. However, unlike traditional assets that pay dividends, Bitcoin only excels at dancing it’s own rhythm.
Go for Alternative #1: Grayscale Bitcoin Trust
You won’t find a Bitcoin ETF on U.S. exchanges sitting around, but drop by Grayscale Investments and say hi to the Grayscale Bitcoin Trust. Crafted by clever fellow Barry Silbert, it’s a successful sidestep of the Securities and Exchange Commission.
With a whopping $38 billion under management, it rests without showing off among the biggest 20 U.S.-listed funds. But, beware; the trust doesn’t always behave like a well-trained, controllable ETF. It chases its own tail at times with “tracking error”, meaning it won’t always reflect Bitcoin’s exact returns. It also bites with a 2% annual management fee. But hey, things can’t get all dire, right? The bright side: U.S. investors can lock the Trust’s shares in a retirement account, and the chances of it blowing up are significantly less.
Look North to Alternative #2: Canadian Bitcoin Exchange-Traded Funds
The U.S. Securities and Exchange Commission is yet to approve Bitcoin ETFs, although it hasn’t stopped people from trying. However, there are four Bitcoin ETFs listed in Canada. Raid your piggy bank, I say, but do note that these funds have the label “foreign investments” and you might need your brokerage’s A-okay before proceeding.
The elephant in the room here is foreign investments may expose you to currency risk. But on the bright side, these ETFs usually come with perks like convenience, familiar trading procedures, and clear regulatory frameworks.
Get Rollin’ with Alternative #3: Coinbase and Other Crypto-Focused Stocks
Behold Coinbase Global. Launched in April 2021, it rode the Nasdaq wave to touch $100 billion before tumbling down 40%. You can say it’s overpriced or call it a “speculative excess,” but it’s impossible to ignore its profitability.
That being said, always remember, all that glitters isn’t cryptocurrency. Big names like Fidelity Investments and Goldman Sachs are also setting their sights on cryptocurrencies and bringing their A-game. So yes, while the initial growth spurt is exhilarating, things can get rough when more competitors join the party. So, it’s always good to know who you’re betting your horse on in this frantic race.
However, with a bit of common sense, due diligence, and a pinch of luck, you might just navigate the Bitcoin roller coaster with a steadier hand.
Intrigued already!
Curious about what makes Bitcoin the ‘New Gold’? How to muster the courage to invest in Bitcoin, stocks, and bonds? Or how you can get your hands on Gold ETFs? Dig into our
Light-Reader’s Guide on Bitcoin: The New Gold, Bracing through the Wind: Investing in Bitcoin with Stocks and Bonds, and Unleashing Gold: A Beginner’s Guide to Gold ETFs.