Bitcoin has soared an eye-popping 22,000% over the past decade, so it’s clear that many early adopters probably have become millionaires — the world’s biggest crypto launched back in 2009. And this top cryptocurrency continues to head higher these days, with a 100% increase so far this year, suggesting there may be a lot more to gain if you continue to hold on to Bitcoin for the long term.
This means it isn’t too late to get in on this popular cryptocurrency. But some investors may not be comfortable enough with cryptocurrency markets to invest directly in an asset like Bitcoin. Well, the good news is you don’t have to be a crypto expert — or even buy Bitcoin itself — to benefit from the cryptocurrency’s performance. This is thanks to a newish class of assets, approved by regulators earlier this year: spot bitcoin exchange-traded-funds (ETFs).
The iShares Bitcoin Trust ETF (IBIT 4.83%) has been the most traded among rivals since its launch, showing its popularity among investors, and in recent days has attracted huge inflows. The asset holds Bitcoin and tracks the performance of this top cryptocurrency — and you only need about $50 to get in on it. Could this investment make you a millionaire? Let’s find out.
Image source: Getty Images.
How ETFs work
First, a little background about ETFs. These funds buy a particular asset or set of assets to replicate the performance of an asset, an industry, or an index — for instance, biotech stocks or the S&P 500. And they trade daily throughout trading sessions just like a stock. So, you can easily buy or sell them as you would do with a stock. The one difference that’s important to note is ETFs come with fees that cover the management of the fund — you’ll want to choose an ETF with fees that are under 1% so they don’t diminish your returns over time.
ETFs are a great way to get in on areas we may not be too familiar with, because the fund’s manager does the work of selecting the assets and making those purchases.
Now, let’s consider the iShares Bitcoin Trust. It comes with a fee of 0.25% so it meets our expense criteria. And it’s also important to note that the ETF is managed by BlackRock, the world’s biggest asset manager with more than $10 trillion in assets under management. BlackRock buys Bitcoin for the fund at spot prices, or current prices, so that it can accurately reflect the crypto’s performance.
This has proven to be the right strategy as the ETF has climbed in lockstep with the underlying asset, as you can see in the chart below.
Bitcoin Price data by YCharts
A potentially “crypto-friendly” president
Since the presidential election, Bitcoin and the ETF have had extended gains on optimism that President-elect Trump and his administration would take a “friendly” approach with the crypto market. For example, while campaigning, Trump said he would make the U.S. “the crypto capital of the planet” and suggested he would name regulators who support the development of digital assets.
This has helped the size of the iShares Bitcoin Trust balloon in recent times. Over election week earlier this month, the fund saw $1 billion in inflows, CNBC reported, citing FactSet data. The ETF now has more than $40 billion in assets, and according to Bloomberg senior ETF analyst Eric Balchunas, it’s among the top 1% of ETFs by assets.
Now, let’s get back to our question: Could this top Bitcoin ETF make you a millionaire? It’s true that Bitcoin itself, as mentioned above, likely made many early investors millionaires. But it’s rare when one asset does this job on its own, and it often involves the investor taking on a lot of risk — for example, taking a huge position in one stock, crypto, or ETF. So, it’s not a good idea to do this and count on one particular investment to carry you into millionaire territory.
That said, there’s reason to be optimistic about Bitcoin moving forward, and therefore this top Bitcoin ETF, too. As part of a diversified portfolio, including other quality assets, the iShares Bitcoin Trust ETF could help you become a millionaire over time — and now, as momentum accelerates, may be a great time to get on board.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
