iShares Bitcoin Trust ETF: Buy, Sell, or Hold?

So you’re thinking about buying some Bitcoin (BTC 3.01%), but you’d prefer to treat it like a traditional stock. Opening an account with a crypto-trading service sounds like a hassle and a security risk. Fortunately, there are several exchange-traded funds (ETFs) on the market nowadays that will let you track Bitcoin prices in a stock-like security.

The most popular spot Bitcoin ETF so far is the iShares Bitcoin Trust ETF (IBIT 2.97%). This fund comes with the mighty financial backing of investment management giant BlackRock and the household-name familiarity of its iShares fund family.

The iShares fund is a respectable investment option for both new and experienced crypto investors — but is it your best Bitcoin option right now? Let’s take a look.

The basics of spot Bitcoin ETFs

Spot Bitcoin ETFs opened up the crypto market to several new investor types in January 2024. For example, individual retirement accounts (IRAs) and 401(k) plans rarely come with crypto-trading services. Institutional investors prefer the regulated nature of ETFs over the looser rulebook concerning direct cryptocurrency investments. The new ETFs made Bitcoin investments easily available to accounts with limited asset-type selections.

The new asset class adds some traditional stability and regulatory certainty to the newfangled field of investing in digital assets. So if you wanted to add some Bitcoin exposure to your retirement portfolio, the ETFs made that idea readily available.

How the iShares ETF stands out

The iShares Bitcoin ETF comes with a few investor-friendly qualities:

• The fund charges a modest annual-sponsor fee of 0.25% (once the introductory fee rebate expires in January 2025).
• It’s hard to beat the iShares fund family’s brand awareness. Three of the 10 largest ETFs on the market today are iShares names, each managing more than $100 billion of net assets.
• The iShares funds are popular for good reason. With BlackRock’s deep pockets backing the fund family, investors never have to worry about each ETF’s financial future.
• The new Bitcoin fund is already a popular choice in the iShares portfolio. With more than 1,400 funds under iShares’ management, the Bitcoin fund is the 30th largest at $21.1 billion of cryptocurrency assets under management.
• Popularity can be a real benefit. High-trading volumes result in a narrow spread between bid and ask prices, giving investors a more precise real-world price than less popular funds with wider bidding spreads.

It isn’t always the clear leader in every field. The ARK 21Shares Bitcoin ETF and the Bitwise Bitcoin ETF offer slightly lower fee ratios, for instance. The Vanguard fund family is arguably even more reputable than iShares, but I don’t expect John Bogle’s firm to enter the crypto market anytime soon.

Some may prefer the ever-so-slightly lower fees found elsewhere, or the brand value of famed growth investor Cathie Wood standing behind the ARK 21Shares option, or the unique Bitwise strategy of investing some of its management fees in Bitcoin developer organizations.

But in general, the iShares fund is the clear leader of this field in terms of investor interest, and there’s nothing wrong with that. It’s a robust ETF under management of a well-respected firm, and the fees are within a rounding error of Bitwise’s optimal 0.20% rate.

Image source: Getty Images.

Alternative Bitcoin investment strategies

You could always bite the bullet and buy Bitcoin directly. That may mean opening a new account with an unfamiliar financial institution, sharing financial data such as your bank account number (to fund the new account), and learning the ins and outs of a different trading system. Moreover, crypto exchanges such as Coinbase (COIN 3.23%) and Robinhood (HOOD -0.70%) add fees to their Bitcoin purchases, either directly or in the form of a small adjustment to the cryptocurrency price. ETF trades are usually fee-free nowadays.

Still, you might prefer the true ownership of actually holding the digital currency. Bitcoin might eventually become a useful medium for everyday transactions, and an ETF won’t help you participate in that function. And of course, even giants may fall: BlackRock isn’t likely to go bankrupt soon, but I can’t argue that the risk is exactly zero. Those buy-in fees I mentioned for direct Bitcoin buys may look unwelcome up front, but they work out to no more than 5 years’ worth of annual ETF fees.

You could always take a less direct route into the crypto market. Coinbase and Robinhood are leading crypto exchanges and also interesting stocks to own in their own right. Enterprise software developer MicroStrategy (MSTR 2.98%) has essentially transformed itself into a Bitcoin fund of sorts, investing most of its cash in the cryptocurrency and adding more over time. Bitcoin miners such as Marathon Digital Holdings (NASDAQ: MARA) and Riot Platforms (NASDAQ: RIOT) also rely on Bitcoin’s price in the long run. In short, there are many ways to add some Bitcoin exposure to your stock portfolio, each with a distinct level of market risk and potential rewards.

Should you buy, sell, or hold the iShares Bitcoin ETF?

If you have read this far, I assume you have some interest in Bitcoin investments. If so, the iShares Bitcoin ETF offers a comfortable path to indirect Bitcoin ownership, with modest fees and a robust financial platform.

Overall, I think every investor should have some exposure to Bitcoin and other cryptocurrencies these days. I can feel the rumblings of a digital revolution in the old-school banking system, payment services, and so on. It would be a shame to watch that sea change from the sidelines with no skin in the game.

The iShares ETF isn’t necessarily my personal favorite, but it’s certainly on the short list of funds deserving further research. If you already own it, the iShares Bitcoin ETF is a robust hold for the long run. If not, it could be a helpful buy right now, awaiting the price-boosting effects of the recent Bitcoin halving and broader consumer use of cryptocurrencies.

I honestly can’t think of any reason to sell the iShares fund today unless you think Bitcoin already peaked and will only go lower from here. I don’t think that’s right, but your vision may vary.