Buying the largest spot Bitcoin ETF should be pretty much as good (or bad) as owning the actual cryptocurrency. There are some quirks to consider, though. Here’s what you need to know.
Whatever bitcoin (BTC 2.52%) does over the next five years, iShares Bitcoin Trust ETF (IBIT 4.04%) will follow almost exactly the same pattern.2030 is basically an eternity away when you’re dealing with the volatile cryptocurrency market. Nobody knows exactly what’s coming up, and there will almost certainly be both bullish and bearish surprises along the way. That being said, let me sketch up the moast likely scenario for the iShares Bitcoin ETF over this period.
Why I expect Bitcoin to rise
First and foremost, I do expect Bitcoin prices to rise in the long run.
The original cryptocurrency has proved its worth as a reliable tool for long-term wealth storage. The strictly limited supply should boost Bitcoin prices over time, assuming that demand for this digital coin increases. That’s almost a foregone conclusion at this point, given the U.S. government’s embrace of Bitcoin ownership and the emergence of Bitcoin-based exchange-traded funds (ETFs).
The Bitcoin community must stave off challenges from newer cryptocurrencies, including hard forks such as Bitcoin Cash (BCH 5.32%) and Bitcoin SV (BSV 5.19%). It should also trade in its encryption algorithm for a solution that’s resistant against quantum computer decryption attacks, perhaps not right away but certainly in the next decade.
As long as Bitcoin can dodge these risks,it has a strong first-mover advantage as people,governments,and companies continue to embrace cryptocurrencies.Rising interest in Web3 solutions and decentralized finance apps will accelerate that trend. Again, there are real risks on the table but I strongly expect Bitcoin to gain value over time.
image source: Getty Images.
How closely does the iShares ETF follow Bitcoin?
ETFs are incredibly good at reflecting the returns of their underlying holdings. In this case, you can bet that the iShares Bitcoin ETF will follow Bitcoin’s every move.
There is a modest sponsor fee of 0.25% per year, allowing iShares owner Blackrock (BLK 2.08%) to make some money from running this popular ETF. Even so, it’s hard to tell the cryptocurrency apart from the ETF in long-term price charts.As of August 19, both have gained roughly 141% as the ETF was launched.