To The Moon

Invest in Bitcoin BTC, miners or upcoming spot Bitcoin ETFs (assuming SEC approves of them in Jan 2024)?

Let's put miners aside first and discuss the pros and cons of investing in Spot BTC ETF versus investing in BTC directly via a crypto exchange like $Coinbase Global, Inc.(COIN)$   It really depends on your personal preference and the country that you're in. All 3 are inter-related and will be on a similar uptrend or downtrend anyway. That being said, let me list you some points for your consideration (Bitcoin Versus Spot Bitcoin ETFs): 

ADVANTAGES of investing in Spot BTC ETF (should it gets SEC approval in Jan 2024):

1) Convenience - Accessibility to a broader range of investors. Spot bitcoin ETFs substantially lower the barriers to entry into the crypto market. Investors are excused from managing wallets with bitcoins, navigating online crypto exchanges, or grappling with private and public keys. Removing these technical hurdles simplifies asset management, making it a more attractive proposition for those accustomed to traditional investments, since it trades just like a typical stock.

2) Liquidity - Spot bitcoin ETFs make buying and selling bitcoins easier through familiar brokerage accounts (Blackrock, Ark invest etc). The process mirrors trading traditional stocks or ETFs, providing an intuitive transition for mainstream investors. Unlike some investment vehicles that require a substantial minimum investment, spot bitcoin ETFs should generally not have a high minimum investment. ETF shares can be purchased in single-share quantities, making them accessible to retail investors. However, transaction fees and the ETFs expense ratio often impact smaller investments more. So, do your calculations if you're buying Spot Bitcoin ETFs in smaller quantities.

3) No Issues with Regulatory oversight: When you purchase your own bitcoins, you might be doing so without the backing of clear, standardized regulations. Spot bitcoin ETFs are subject to SEC rules that ensure transparency and protect investors.

4) Tax implications: In certain jurisdictions / countries, spot bitcoin ETFs could have tax benefits compared with holding cryptocurrencies directly. The tax treatment of ETFs is long-established, and investors can know going in what their tax obligations will be.

DISADVANTAGES of investing in Spot BTC ETF (should it gets SEC approval in Jan 2024):

1) Management fees (largest drawback imo) - While investing in spot bitcoin ETFs would save you the time and costs of exchanging and securing bitcoins yourself, these ETFs do charge management fees or expense ratios to cover operational costs, diminishing your returns over time. These fees can be higher than traditional equity ETFs because the ETF must also pay fees for exchanging and securing bitcoins. This point alone makes spot Bitcoin ETFs severely unattractive IMHO. I'd rather hold Bitcoin directly via a crypto exchange TBH. Of course, that is subject to your country's rules and regulations. 

2) Tracking error - While spot bitcoin ETFs try to mirror the performance of bitcoin closely, tracking error differences between the ETF share cost and the value of bitcoin can occur. Reasons for this might include liquidity in the market, delayed rebalancing of the fund's holdings, and management fees. As such, I'd prefer to hold Bitcoin over ETFs. 

3) Security risks -  The number of coins that spot bitcoin ETFs would have to hold to be viable would make them attractive targets for cybercriminals. Bitcoin and other cryptocurrencies rely on digital keys and internet-based storage and transfer. While ETF managers use multilayered security protections like cold storage and encryption, no system is impenetrable. Successful major breaches at spot bitcoin ETFs could result in the theft of thousands or even millions worth of bitcoins. Unlike cash in a bank, stolen bitcoins can quickly be transferred anonymously and are almost impossible to retrieve. While rare, such cyber thefts have affected some cryptocurrency exchanges and holders, and an incident like this for a spot bitcoin ETF would severely damage investor confidence and fund stability. However, note this risk applies to investing directly in Bitcoin via a crypto exchange like Coinbase too. Though rare, such hacks may happen. 

Could Spot Bitcoin ETFs Affect the Price of Bitcoin? A spot bitcoin ETF does not directly affect the price of bitcoins, but it can indirectly affect their price in several ways:

1) Increased adoption - A spot bitcoin ETF will likely attract significant investment inflows from mainstream investors who want exposure to bitcoins within their brokerage accounts. As demand rises, this influx of new investors and capital could boost bitcoin prices.

2) Market validation - The approval and launch of a spot bitcoin ETF would further validate bitcoins in the mainstream financial system. This perceived legitimacy could bolster confidence in bitcoins and drive prices higher.

3) Trading activity - A spot bitcoin ETF could create more avenues for active trading of bitcoin exposure by hedge funds, day traders, and other speculators. This could lead to greater trading volume and volatility.

Due to reasons above, the price of Bitcoin is expected to rise with the approval of Spot Bitcoin ETFs by SEC (assuming this happens in Jan 2024). 

Assuming this event doesn't happen, Bitcoin halving will happen in April 2024 anyway, and prices of Bitcoin is expected to soar to a new high +/- 150 days post halving (based on historical data).

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Now let's discuss a little on Bitcoin miners $CleanSpark, Inc.(CLSK)$  $Marathon Digital Holdings Inc(MARA)$  $Riot Blockchain, Inc.(RIOT)$  

By now, you'd have seen how much these mining stocks have grown. And yes, I'd allocate some money into buying miner stocks. For the very simple reason - if no Bitcoin were mined, there would be no crypto exchanges to talk about and no ETFs to talk about. Bitcoin lays the fundamentals for other infrastructure and blockchain technology  to be build upon, hence their importance. And of course, with the price of Bitcoin soaring (especially after the halving event), financial strength of miner companies who mine Bitcoin effectively and hold truckloads of Bitcoin will see significant improvements. Check out my other posts to see my evaluation of these 3 miner stocks - Cleanspark vs MARA vs RIOT.

Till then, Crypto FTW!! [Cool] To another year of fruitful investing ahead! [USD]