Cryptocurrencies, like Bitcoin and Ethereum, have transformed the financial world. They offer an alternative way to build and store wealth. Many people invest in digital currencies directly by buying and holding them in digital wallets. However, not every individual agrees to this idea. As a result, there is growing interest in financial products that make cryptocurrency investment easier. One such product is cryptocurrency exchange-traded funds (ETFs).
Cryptocurrency ETFs allow investors to gain exposure to the digital currency market without the need to hold or manage the actual coins. These funds trade on traditional stock exchanges, making them accessible to investors who may not be familiar with handling digital wallets.
Canada was among the pioneer countries to start Bitcoin and Ethereum ETFs, in 2021. These ETFs have gained popularity because they allow investors to grow their wealth in tax-sheltered accounts. They include registered retirement savings plans (RRSP) or tax-free savings accounts (TFSA).
In this post, we’ll explore some of the top Bitcoin ETFs available in Canada. These ETFs provide a safe and convenient way to invest in the growing world of digital assets.
The Appeal of Cryptocurrency ETFs
Investors are drawn to cryptocurrency ETFs because they offer exposure to the increasing demand for digital coins such as Bitcoin and Ethereum. These funds are popular among investors looking to diversify their portfolios. While some choose to buy and hold digital currencies directly, others prefer the simplicity of investing in ETFs.
Among the major advantages of crypto ETFs is that they trade on exchanges. This guarantees high liquidity, implying that they can be easily bought and sold. As Ross Mayfield, an investment strategy analyst at Robert W. Baird & Co., noted in 2021, there is high demand for a Bitcoin product that includes the best features of ETFs: liquidity, exchange-traded, and ease of use.
This demand has only increased. Sean Farrell, Fundstrat’s head of digital asset strategy, said in 2023 that the Bitcoin ETF market could surpass the precious metals ETF market in terms of value. He suggested that Bitcoin ETFs might grow to become a $300 billion market. This level of growth highlights the strong interest in Bitcoin ETFs as a financial product.
Additionally, the fact that cryptocurrencies such as Bitcoin are already widely accepted in the country has created an avenue for BTC EFTs to blossom. The high liquidity in the crypto market has seen more business support crypto payments. As such ecommerce platforms such as retail shops now allow their customers to pay for products using crypto. Also, huge online Canadian establishments such as casinos support Bitcoin as a payment option. Generally, online casinos in Canada process Bitcoin transactions faster compared to conventional banking options. Moreover, the transaction fee on BTC withdrawals is considerably low.
Canada’s Early Adoption of Bitcoin ETFs
In 2021, Canada became a leader in the cryptocurrency ETF market by launching both Bitcoin and Ethereum ETFs. This marked a significant milestone in the financial world, as these products provided a new way for investors to gain exposure to digital currencies. Bitcoin and Ethereum ETFs in Canada enable investors to put returns in tax-sheltered accounts, giving them a financial advantage while investing in digital assets.
Ethereum, the most widely used blockchain technology, has also seen its ETFs gain traction. Ether, the digital currency of Ethereum, is the second-largest cryptocurrency after Bitcoin. As Ethereum’s popularity grows, so does the interest in its ETFs.
Top Bitcoin ETFs in Canada
Below are some of the top Bitcoin EFTs in Canada.
Purpose Bitcoin ETF (TSX: BTCC)
The Purpose Bitcoin ETF is considered the world’s first physically settled Bitcoin ETF. This means the fund is backed by real Bitcoin held in cold storage, making it a secure option for investors. Purpose Investments, a Canadian investment firm, manages this ETF. Investors can easily buy and sell Bitcoin without needing a digital wallet. With a management fee of 1%, it’s a convenient way to gain exposure to Bitcoin.
CI Galaxy Bitcoin ETF (TSX: BTCX.B)
CI Global Asset Management and Galaxy Fund Management partnered to launch this ETF. Galaxy Digital, a leading company in the digital asset space, brings credibility to the fund. The CI Galaxy Bitcoin ETF gives investors exposure to Bitcoin through an institutional-quality platform. With one of the lowest management fees (0.4%), it’s an attractive option for cost-conscious investors.
Fidelity Advantage Bitcoin ETF (TSX: FBTC)
The Fidelity Advantage Bitcoin ETF provides the security of Fidelity’s in-house cold storage services for its Bitcoin holdings. This makes it a secure choice for investors concerned about the safety of their digital assets. In January 2024, the fund lowered its management fee to 0.39%, making it even more appealing to investors looking for low-cost exposure to Bitcoin.
3iQ CoinShares Bitcoin ETF (TSX: BTCQ)
The 3iQ CoinShares Bitcoin ETF tracks the price of Bitcoin in US dollars and holds its Bitcoin assets in cold storage. With a management fee of 1%, it provides a simple and secure way for investors to invest in Bitcoin while tracking its performance in USD.
Evolve Bitcoin ETF (TSX: EBIT)
The Evolve Bitcoin ETF offers exposure to Bitcoin based on the CME CF Bitcoin Reference Rate. This is a benchmark index price for Bitcoin in US dollars which is recorded daily. With a management fee of 0.75%, it’s a popular choice for investors looking for exposure to Bitcoin through a trusted and well-established ETF.
How Bitcoin ETFs Affect Bitcoin’s Price
The growth of Bitcoin ETFs has a significant impact on the price of Bitcoin. When companies issue these ETFs, they need to hold actual Bitcoin to back up the products. This creates buying pressure, which can push the price of Bitcoin higher.
Additionally, Bitcoin ETFs make it easier for institutional investors, such as pension funds and hedge funds, to invest in Bitcoin. This can further increase demand, leading to price growth.
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