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The U.S. Securities and Exchange Commission on Wednesday approved the first spot Bitcoin exchange-traded fund in the United States. But experts are urging caution before putting your money into the coveted ETF.
The agency approved 11 Bitcoin ETF applications involving funds from. black rockFidelity, Ark Investments, tree of wisdom And grayscale. This new investment gives everyday investors even more access.
“This is a huge step forward for Bitcoin,” said Brian Armor, director of North American passive strategies research at Morningstar, who analyzed the new asset. But before you rush to buy a Bitcoin ETF, there are some things to consider.
“Fear of missing out is a bad investment strategy,” he added.
The SEC’s decision is highly anticipated, and the cost is Bitcoin The first Bitcoin ETF began trading on Thursday and at one point soared above $49,000, its highest level since December 2021.
Bitcoin still has “high volatility”
While the approval of a Bitcoin ETF is a milestone, experts say it’s important to consider your goals and risk tolerance before purchasing.
“Bitcoin has unique risks and is highly volatile,” Armor said, noting that its return volatility has been significantly higher than the stock market over the past five years.
“When I started building my position, I bought at 1%. [allocation] We limit it to 3% at a time,” said Ivory Johnson, a certified financial planner and founder of Delancey Wealth Management in Washington, D.C. He is also a member of CNBC’s Financial Advisor Council.
He said that with a smaller allocation of Bitcoin in a portfolio, there is room for significant upside potential while minimizing downside risk.
“We have approved the listing and trading of certain Spot Bitcoin ETPs. [exchange-traded product] SEC Chairman Gary Gensler said in a statement on Wednesday that “Today’s rise in stock prices does not imply that we endorse or endorse Bitcoin,” adding, “Investors are not convinced that Bitcoin or its value is tied to cryptocurrencies. “We must remain vigilant about the myriad risks associated with linked products.”
“Better than anything else on the market”
Bitcoin does come with risks, but if you want added exposure, it may be worth considering a new Bitcoin ETF compared to owning Bitcoin directly or owning a Bitcoin futures ETF. says the expert.
“These Spot Bitcoin ETFs are better than any other ETF on the market,” Armor said, referring to other Bitcoin investment options. Of course, you also need to consider the risks of where you buy your assets and the custodian.
New ETFs may be cheaper than older fund options. ProShares Bitcoin Strategy ETF (BITO) — The first Bitcoin futures ETF with a 0.95% expense ratio.of grayscale bitcoin trust (GBTC), which was charging a 2.0% fee before converting to a Spot Bitcoin ETF, now charges a 1.5% fee.
Armer said if you’re not confident about buying a Bitcoin ETF on the first day of trading, you can wait and see. He said funds that are “amassing assets” are “likely to stick around and have the lowest transaction costs.”
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