Even Bitcoin (Cryptocurrency: BTC) With it soaring to an all-time high of over $100,000, it's easy to see why many are still wary of cryptocurrencies. Cryptocurrency markets are notorious for their volatility, and the price of Bitcoin can fluctuate wildly on a daily basis.
However, if you are willing to accept the inherent volatility of cryptocurrencies, iShares Bitcoin Trust (NASDAQ:IBIT) It might be perfect for your portfolio. In a very short period of time, Bitcoin has become the most popular way for investors to gain exposure to Bitcoin, and it currently ranks in the top 1% of all exchange traded funds (ETFs) in terms of assets under management. Masu.
iShares Bitcoin Trust is one of about a dozen spot Bitcoin ETFs launched earlier this year. It's part of BlackRock's iShares ETF family, so you can buy and sell it just like any other iShares ETF.
The iShares Fund invests exclusively in cryptocurrencies. Unlike other ETFs in your portfolio, it does not invest in a diversified basket of assets. It does one thing: invest directly in Bitcoin via the spot cryptocurrency market, and it does it very well.
That's a big deal. This means you don't have to worry about creating a blockchain wallet, remembering a set of encryption keys, or opening an account on a cryptocurrency exchange. iShares Bitcoin Trust is designed to take all the complexity out of investing in cryptocurrencies, and it does so at minimal cost. Therefore, it is perfect for people who are just getting started with cryptocurrencies.
At this point you may be thinking: “Sure, it's great to be exposed to Bitcoin, but what if you need exposure to a wide range of cryptocurrencies?” The answer is very simple. Bitcoin makes up such a large portion of the overall crypto market capitalization that trying to access a broader basket of cryptocurrencies is probably not worth your time or money.
For example, Bitcoin currently accounts for a whopping 55% of the total market capitalization of the cryptocurrency market. So even though there are literally thousands of different cryptocurrencies, all you really need is exposure to Bitcoin, which accounts for more than half of the total crypto market capitalization.
Image source: Getty Images.
Additionally, Bitcoin is one of only two cryptocurrencies that ETFs can purchase in the spot crypto market, the other being Ethereum. Therefore, if an ETF is looking to track the performance of other cryptocurrencies, it will need to introduce a mix of financial derivatives. This not only introduces tracking errors but also significantly increases costs.
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That may change in the future as cryptocurrencies become more and more mainstream. coinbase global (NASDAQ:Coin)For example, we recently created the Coinbase 50 Index, which is designed to track the performance of the top 50 cryptocurrencies, and we plan to offer investment products based on that index. But so far, U.S. regulators have not approved the specific financial instruments needed to track that index.
You probably know that Bitcoin has been one of the world's best-performing assets over the past decade. Although they are volatile and tend to suffer severe declines every few years, you need to keep a long-term perspective. The leading cryptocurrencies have a track record of outperforming all other asset classes over long periods of time.
For example, from 2011 to 2021, it gave investors an annualized return of 230%. In contrast, the next best asset class (tech stocks) returned only 20%. You should look for an investment product that can track the price of Bitcoin on a nearly one-to-one basis based on its track record of performance.
Bitcoin/USD chart by TradingView.
As you can see from the chart above, that's exactly what iShares Bitcoin Trust offers. The blue line above represents Bitcoin price fluctuations, and the red line represents ETF stock price fluctuations. While all ETFs are prone to some degree of tracking error, iShares Trust does a very good job of tracking Bitcoin's performance. Tracking this spot ETF since January has been, well, on point.
From my perspective, iShares Bitcoin Trust's low cost, efficiency, and transparency make it a great way to get exposure to Bitcoin. Like other ETFs, it is easy to buy and sell and provides a one-to-one look at the long-term price performance of cryptocurrencies. As long as prices continue to rise, I can't think of a better product for first-time crypto investors.
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Dominique Basurto has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin, Coinbase Global, and Ethereum. The Motley Fool has a disclosure policy.
Still confused about cryptocurrencies? This exchange-traded fund may be right for you Originally published by The Motley Fool
