Bitcoin Spot ETF Complete Guide: From Zero to Investment Decision

Why 2024 Will Be a Turning Point for Crypto Investment

January 10, 2024, marks a milestone in the crypto market—the U.S. Securities and Exchange Commission (SEC) officially approved the first Bitcoin spot ETFs for trading. This is not just a regulatory breakthrough but also a key moment signaling Bitcoin’s transition from a niche tech community to mainstream finance.

Prior to this, the SEC had been hesitant to approve spot market ETFs due to concerns over lack of regulation and susceptibility to manipulation. However, with deeper cooperation with professional custodians and the introduction of the “surveillance sharing agreement” mechanism, these risks are now considered manageable, gradually alleviating regulatory concerns.

What does this mean for investors? Bitcoin investment has shifted from a high-threshold professional activity to a financial tool accessible to everyone. Just like the democratization of stocks and funds in the past, Bitcoin ETFs are lowering the entry barrier.

Understanding Bitcoin ETF: A 3-Minute Quick Guide

Simply put, a Bitcoin ETF is a financial certificate tracking Bitcoin’s price. You don’t need to study blockchain, manage private keys, or monitor markets 24/7—just like buying stocks, you can participate in Bitcoin’s price movements with a few clicks.

Bitcoin ETFs on the market are mainly divided into two types:

Spot ETF — The fund company directly holds physical Bitcoin, with a 1:1 correspondence. When Bitcoin’s price fluctuates, the ETF’s net asset value (NAV) also changes accordingly. It offers the highest tracking accuracy and is especially suitable for long-term investors seeking stable Bitcoin allocation.

Futures ETF — The fund company does not hold Bitcoin directly but tracks price movements through Bitcoin futures contracts. These products have been available since 2021, with mature technical architecture and more flexible risk management. However, holding them long-term can be affected by roll-over costs, which eat into profits.

Five Benefits of Investing in Bitcoin ETFs

1. Complexity Disappears

Bitcoin investing used to be full of technical jargon—private keys, cold wallets, seed phrases… These are barriers for newcomers. ETFs package all that into simple securities, like having an agent manage everything for you—you just place an order like buying a fund.

2. Significantly Enhanced Security

ETF issuers cooperate with professional custodians, protecting assets with financial-grade safeguards. Compared to managing your own wallet (which faces hacking, scams, platform insolvency risks), ETF custody mechanisms are transparent and regulated, greatly reducing risks.

3. Asset Allocation Becomes Flexible

Bitcoin is volatile but has great long-term growth potential. Including it in your portfolio can effectively diversify risk—avoiding over-reliance on a single stock or bond. Plus, viewing all assets on the same report makes rebalancing easier.

4. An Inflation Hedge

Bitcoin’s supply is fixed at 21 million coins, never to be increased. During inflationary periods, this scarcity becomes a shield for value. Adding Bitcoin ETFs to your portfolio can provide protection against fiat currency depreciation.

5. Profit from Both Up and Down Markets

Bitcoin ETFs are not just bullish instruments. If you expect the price to fall, you can buy inverse ETFs or use short mechanisms, turning downward trends into profit or risk hedging tools.

Risks You Must Know

ETFs change the way you invest but do not eliminate Bitcoin’s inherent risks.

Price Volatility Remains Intense

Bitcoin is known for “sharp rises and falls.” Daily drops over 10% are common. If you might need the money in the short term or are sensitive to volatility, you should evaluate carefully.

ETF Price May Deviate from Spot

In theory, ETFs should track Bitcoin perfectly, but in practice, factors like management fees, trading hours, and market premiums/discounts can cause deviations. Especially when the U.S. stock market is closed (weekends), Bitcoin can surge or plunge suddenly, and ETFs can only reflect these changes when markets reopen.

Regulatory Environment Is Still Evolving

Bitcoin markets are still emerging. While U.S. regulation is relatively mature, other regions’ legal frameworks are still developing. In extreme events, market reactions can be chaotic, and investor protections are less certain.

Bitcoin ETF vs. Direct Bitcoin Purchase: How to Choose?

The logic is simple: If you prefer convenience and straightforward asset allocation, ETFs are more suitable; if you want full control over your assets and more operational freedom, direct purchase is better.

Mainstream Bitcoin ETFs on the Market

How to Buy Bitcoin ETFs (Practical Guide)

Due to regulatory considerations, local investors cannot directly purchase Bitcoin ETFs through domestic crypto exchanges. However, there are two legal ways:

Method 1: Via Overseas Brokers (Fastest and Easiest)

This is the lowest barrier and most direct method.

Steps:

1. Choose an overseas broker offering Bitcoin ETF trading
2. Open an international securities account online (usually within 10 minutes)
3. Transfer funds to the overseas account
4. Log in to the trading platform, search for the ETF code (e.g., IBIT, FBTC), enter the amount, and place an order

Cost considerations:

• International remittance fees apply; it’s advisable to send larger amounts to reduce proportional costs
• Profits are considered “overseas income,” so tax regulations on exemptions should be checked

Method 2: Sub-Agency Trading (Requires Professional Investor Qualification)

If you meet the “professional investor” criteria, you can invest in overseas Bitcoin ETFs through domestic brokers.

Eligible investors include:

Institutional investors: Banks, insurance companies, trust companies, and other legal entities.

High-net-worth individuals:

• Able to provide proof of assets over NT$30 million, or single transactions exceeding NT$3 million with total assets over NT$15 million at the bank, and a declaration of total assets over NT$30 million
• Possess relevant investment experience or professional certification

Advantages: Fully legal and formal procedures, but with significantly higher thresholds.

FAQs

Q: Are Bitcoin ETFs really safe?

A: Compared to directly holding Bitcoin, ETFs are indeed safer. Professional custody and strict regulation greatly reduce risks like scams or platform failures. However, Bitcoin’s price volatility remains, so this risk persists.

Q: Are there other cryptocurrencies with ETFs?

A: Yes. Ethereum spot ETFs have been approved, with similar investment methods to Bitcoin ETFs. Other coins are still under observation; currently, BTC and ETH dominate.

Q: Which is better for me—spot ETF or futures ETF?

A: It depends on your investment style. Spot ETFs have lower holding costs and high tracking accuracy, ideal for long-term allocation. Futures ETFs are more flexible but suffer from roll-over costs over time, better suited for short-term trading or hedging.

Disclaimer: This article provides general information and does not constitute investment advice. Bitcoin and related ETFs involve high risks, with prices potentially fluctuating significantly or even becoming worthless. Please assess your financial situation carefully before investing and consult professionals if needed.