Bitcoin up to $72,000 - why not invest directly?
Bitcoin rose over $72,000 USD to a brand new record high as the UK followed the US in allowing Bitcoin ETFs to trade. Bitcoin's most popular ETF, $iShares Bitcoin Trust(IBIT.US$ received $2 billion of new flows this week alone.
With Bitcoin going crazy these past few weeks, and the halving coming up in April - many traders are asking: why not buy it directly?
There are a few risks with investing directly into cryptocurrency, that crypto ETFs, Bitcoin Spot ETFs in this case, can help reduce.
Here are some concerns that arise when looking at buying Bitcoin directly:
Volatility: Cryptocurrency markets are known for their extreme volatility, with prices often experiencing significant fluctuations within short periods of time. While nothing beats monitoring the live market 24/7 and reacting instantly, some spot ETF investors may prefer being ahead of an anticipated gap down or gap up, as it aligns better with their investment style.
Regulatory Risks: Cryptocurrency exchanges operate with relatively little regulation compared to traditional stock brokers, increasing the risk of fraud, market manipulation, and security breaches.
Security Concerns: While investors have direct custody of the coins purchased on crypto exchanges, these platforms and wallets are vulnerable to hacking and cyberattacks. In the event of a compromise, investors risk losing their entire investment with no recourse for recovery.
Trading Fees. Crypto exchanges typically charge higher fees to stock brokers. While most Australia-based crypto exchanges would charge between 1-2% of the transaction value per order, purchasing a Bitcoin spot ETF on moomoo would only cost $0.99 flat fee per order.
Note: Investors should be aware of the fallout from the collapse of FTX in 2022, the third-largest crypto exchange at the time, which had widespread repercussions on the industry. Furthermore, recent allegations of money laundering against the founder and CEO of Binance have further fuelled distrust among investors.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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b3nt : maybe I'm missing something but isn't the volatility point actually a bigger issue with the ETFs? as you can only trade in market hours you may end up with a massive gap down. whereas you have the chance to react faster in a 24/7 market
Moomoo Down UnderOP b3nt: Thank you for raising an excellent point, b3nt! You're absolutely correct that there's no significant difference in terms of volatility between coins and spot ETFs; both are highly volatile asset classes and should be understood as such. We recommend using our conditional orders to safeguard all your positions.
Investors need to be mindful of their choices and the corresponding risks, including how they monitor their positions. When an investor chooses to invest in a spot ETF, they should anticipate potential gap downs or gap ups following volatility in the live markets before the market opens.
While nothing beats monitoring the live market 24/7 and reacting instantly, some spot ETF investors may prefer being ahead of an anticipated gap down or gap up, as it aligns better with their investment style. They may also prioritise safeguarding against regulatory risks or security concerns over the benefits of a live market, especially for long-term investments.
We hope you find our response useful, and thank you once again for bringing to our attention the potential for miscommunication regarding the volatility of spot ETFs. We will be making some changes to the post.
Powdahound b3nt: Very true. I worry about that
Lysander :
I don't have that kind of money to buy.