Bitcoin ETFs: What to know

The Securities and Exchange Commission has made it easier to invest in bitcoin even as the agency’s head warned the digital currency is not for everyone.

The SEC gave approval to 11 bitcoin exchange-traded funds, including offerings from investment heavyweights BlackRock, Invesco and Fidelity, to trade on U.S. markets. The ETFs, which began trading on Jan. 11, allow small investors to buy into an asset that tracks the price of bitcoin, although investors will not actually own any bitcoins. ETFs contain a basket of assets, for example, gold or tech stocks or bonds, that make it easy to invest in various sectors. The bitcoin ETFs will rise or fall along with the digital currency.

Before this, the only way to invest in bitcoin was to buy it as an individual asset, much like buying individual shares of Apple or IBM. But you would typically need an account at a cryptocurrency exchange to purchase bitcoin. Bitcoin ETFs can be bought through any brokerage.

SEC Chairman Gary Gensler said that while his agency “allowed the listing and trading” of bitcoin ETFs, he emphasized “we did not approve or endorse bitcoin.” Gensler has long been a critic of cryptocurrencies because of their volatility. Bitcoin, for example, hit an all-time high of $64,899 in November 2021 only to plunge to $15,787 a year later. It stands at around $43,000 today.

“Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” Gensler said.