The price of Bitcoin (BTC -0.02%) is back over $100,000. But according to many experts, the run is far from over. Ark Invest CEO Cathie Wood recently reaffirmed her 2030 price target of $700,000. Long term, she believes a single Bitcoin could eventually be worth several million dollars.
Every investor should have at least a small exposure to Bitcoin, even if it’s just $100. That gives you enough cash to easily buy into the two Bitcoin exchange-traded funds (ETFs) below. Just be careful: The two ETFs below provide very different exposures to Bitcoin and crypto in general.
This is the largest Bitcoin ETF in the world
The largest Bitcoin ETF right now — at least measured by the amount of money that has been invested into it — is the iShares Bitcoin Trust ETF (IBIT -0.89%). As of last quarter, the ETF’s holdings were worth roughly $70 billion — more than triple the asset value of the next-largest Bitcoin ETF. Scale allows this ETF to charge lower expense ratios than the competition. The total management fee right now is a reasonable 0.25%. Many competing ETFs charge significantly higher fees.
The best thing about this Bitcoin ETF is that it invests solely in Bitcoin. When you buy Bitcoin directly, you need to deal with a long list of complexities. Taxes can be difficult to track manually, and security issues are commonplace, with many investors falling victim to scams or phishing attempts that drain their accounts with little to no recourse available. By investing in the iShares Bitcoin Trust ETF, all of these complexities become streamlined, just as they would by purchasing any other ETF. As the ETF’s prospectus describes, packaging a Bitcoin investment vehicle as a simple ETF helps “remove the operational, tax, and custody complexities of holding bitcoin directly.”
Perhaps the best news is that buying a Bitcoin ETF lets you automate your investments. So you can buy $100 today, but you can also tell your brokerage to withdraw another $100 each month, with the proceeds automatically invested in more Bitcoin. This helps you dollar-cost average your Bitcoin investment — a huge advantage for such a volatile asset.
As you’d expect, more than 99.9% of the trust’s holdings are invested directly into Bitcoin, with a tiny amount allocated to cash, mostly to meet daily liquidity needs. With such a low expense ratio, this is one of the fastest and most efficient ways to get Bitcoin exposure. But if you want to invest in more than just Bitcoin, check out the new ETF below.
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This crypto ETF invests in more than just Bitcoin
Launched in 2023, the Bitcoin & Ether Market Cap Weight ETF (BETH -1.45%) invests primarily in Bitcoin. But as the ETF’s name suggests, it also allocates some of your funds into Ethereum.
Ethereum is the second-largest crypto asset in the world today. And while it does have distinct differences when compared to Bitcoin, a very simplistic explanation is that it is essentially “programmable” Bitcoin. That is, it is a decentralized asset that allows for other things to be built on top of it, with the Ethereum virtual machine executing commands in a way that can’t be controlled by any one individual. By investing in Ethereum, you’re essentially betting that the wide crypto universe will also prevail, not just Bitcoin.
As of last quarter, this ETF’s portfolio had 88% exposure to Bitcoin, with the remainder invested in Ethereum. Importantly, exposure is gained through futures contracts, not directly through Bitcoin holdings. This approach adds some correlation risk.
As you can imagine, this increased diversification comes with added costs. The expense ratio for this ETF is around 0.95%. For most investors, the cheaper iShares Bitcoin Trust ETF is a suitable option. But if you’d like to make sure you bet both on Bitcoin and crypto in general, this is a great all-in-one ETF to accomplish that. And as with any other ETF, you can set up automated investments to make sure you’re putting more money to work on a regular basis. This way, you don’t need much to get started.
Whether you go with the cheaper and arguably more effective IBIT ETF, or get fancier with the BETH ETF, both give your portfolio instant exposure to crypto markets with as little as $100.
Ryan Vanzo has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.
