Here’s what to know about the first bitcoin ETFs

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The U.S. Securities and Exchange Commission on Wednesday approved the first U.S. spot bitcoin exchange-traded funds. But experts urge caution before piling into the long-awaited ETFs.

The agency signed off on 11 bitcoin ETF applications, including funds from BlackRock, Fidelity, Ark Invest, WisdomTree and Grayscale. The new investment provides more access to everyday investors.

“It’s a big step forward for bitcoin,” said Bryan Armour, director of passive strategies research for North America at Morningstar, who has analyzed the new assets. But there are things to consider before rushing to purchase bitcoin ETFs.

“Fear of missing out is a poor investment strategy,” he added.

The SEC decision was highly anticipated, and the price of bitcoin briefly topped $49,000, the highest level since December 2021, as the first bitcoin ETFs began trading Thursday.

Bitcoin remains ‘highly volatile’

While the bitcoin ETF approval is a landmark event, it’s important to consider your goals and risk tolerance before purchasing, experts say.

“Bitcoin carries unique risks, and it’s highly volatile,” Armour said, noting its variability of returns has been significantly higher than the stock market over the past five years.

‘Better than anything else on the market’

While bitcoin carries risk, if you want to add exposure, experts say the new bitcoin ETFs could be worth considering compared to owning bitcoin directly or bitcoin futures ETFs.

“These spot bitcoin ETFs are better than anything else on the market,” said Armour, referring to other bitcoin investing options. Of course, you should also consider where to buy assets and any custodian risks.

The new ETFs may be cheaper than previous fund options, such as the ProShares Bitcoin Strategy ETF (BITO) — the first bitcoin futures ETF, with an expense ratio of 0.95%. The Grayscale Bitcoin Trust (GBTC) charged 2.0% before converting to a spot bitcoin ETF, and now has fees of 1.5%.

If you’re unsure about purchasing bitcoin ETFs on the first day of trading, you can wait and see what happens, Armour said. The funds “gathering assets” are “more likely to stick around and have the cheapest trading costs,” he said.

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