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Considerations when assessing spot bitcoin ETPs

Key questions to understanding the nuances and unique features of spot bitcoin exchange-traded products (ETPs).

By: Brian Abely Ryan Lessard Patrick O'Donnell
Updated: 8/26/2024
Key Takeaways
  • Spot bitcoin ETPs are the first exchange-traded products in the U.S. that track the price of bitcoin by holding actual bitcoin as their underlying asset.
  • With the long-awaited launch of these ETPs, investors have a new and easier way to gain exposure to the price of bitcoin—without buying it directly—in brokerage, trust, and tax-advantaged accounts.
  • However, these investment products are not all the same and it is important to consider the right provider with the expertise and resources to best track the price of bitcoin, ensure secure custody of the underlying assets, and provide the most value to investors.
  • Among the key topics to understand: the issuer’s experience; why the custodian is so important; the direct and indirect costs; what keeps ETP share prices in line with the price of bitcoin; and tools to evaluate the efficiency of spot bitcoin ETPs.
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Digital assets are not insured by the Federal Deposit Insurance Corporation (FDIC) or protected by the Securities Investor Protection Corporation (SIPC).

Spot bitcoin ETPs are for investors with a high risk tolerance. An investor may lose all or substantially all their investment in these funds. They invest in a single asset, bitcoin, which is highly volatile and can become illiquid at any time.

The performance of spot bitcoin ETPs will not reflect the specific return an investor would realize if the investor actually purchased bitcoin. Investors in a spot bitcoin ETP will not have any rights that bitcoin holders have and will not have the right to receive any redemption proceeds in the underlying bitcoin.

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