Beginner's Guide | Bitcoin ETF Introduction: How to Buy, Advantages, Disadvantages, and Risks

The Moment That Will Change the Game in 2024

January 10, 2024, marks a significant milestone in cryptocurrency investment history—the U.S. Securities and Exchange Commission (SEC) officially approved the first Bitcoin spot ETFs to be listed in the United States. This may seem like a regulatory breakthrough, but it actually signifies that Bitcoin is finally recognized as an asset that can be incorporated into traditional investment portfolios.

Previously, the SEC was concerned about the lack of regulation in the spot market and its susceptibility to manipulation. However, with the participation of professional custodians and the introduction of the “Monitoring Sharing Agreement” mechanism, these risks are now considered manageable. This approval means that cryptocurrencies are officially integrated into the mainstream financial system, transforming Bitcoin investment from a “highly specialized skill” into a “mass-market financial tool” for retail investors.

What is a Bitcoin ETF? Why Should You Pay Attention?

Simply put, a Bitcoin ETF is like a “investment agent” for Bitcoin. You don’t need to study blockchain, digital wallets, or private keys—complex concepts—and you don’t have to watch the market all day. Just place an order like buying stocks, and you can participate in Bitcoin price movements.

The Bitcoin ETFs available on the market mainly fall into two categories:

1. Bitcoin Spot ETF

• The fund company directly purchases and holds actual Bitcoin
• When you buy 1 unit of ETF, the company deposits 1:1 real Bitcoin into custody
• High price correlation, almost real-time tracking of the market

2. Bitcoin Futures ETF

• The fund company does not hold actual Bitcoin but buys Bitcoin futures contracts
• Launched in 2021, relatively mature technology
• No worries about private key hacking, but may experience price deviations

How to Buy a Bitcoin ETF? Get Started in Three Minutes

Method 1: Through Overseas Brokers (Fastest)

This is currently the most convenient way:

1. Choose a broker: Select an overseas broker that offers Bitcoin ETF trading
2. Open an account: Complete the online securities account registration
3. Transfer funds: Deposit funds into the overseas account (note transfer fees)
4. Place an order: Log into the trading platform, enter ETF ticker (e.g., IBIT, FBTC) and quantity

Important notes:

• Avoid small single transfers to reduce costs
• Profits should be reported as “overseas income” for tax purposes
• During US stock market weekends, if Bitcoin experiences significant volatility, ETF prices will only update after the market opens

Method 2: Through a Discretionary Trust (Suitable for High-Net-Worth Individuals)

If you qualify as a “professional investor,” you can invest via domestic brokers:

Eligible:

• Institutional investors (banks, insurance companies, etc.)
• High-net-worth individuals: proof of assets over NT$30 million, or single transactions exceeding NT$3 million, with total bank deposits and investments over NT$15 million

This method is more formal but has higher thresholds.

Bitcoin ETF vs. Direct Bitcoin Purchase: Which Is More Suitable for You?

Which one to choose? It depends on your needs—if you want simplicity and ease, go for ETFs; if you want full control over your assets and more operational freedom (like staking, arbitrage), buy directly.

Advantages of Investing in Bitcoin ETFs

1. Significantly Lower Investment Difficulty
ETFs condense the complex crypto world into simple securities products. Beginners don’t need to learn about private keys, wallets, or other technical knowledge.

2. Security Assurance
Professional custodians manage everything transparently, greatly reducing risks of scams, exchange failures, etc.

3. Portfolio Diversification
Although Bitcoin is volatile, it has strong long-term appreciation potential. Adding ETFs helps diversify risk and integrate with traditional assets.

4. Hedge Against Inflation
Bitcoin’s supply is fixed, making it an anti-inflation asset. It can provide value preservation during inflationary periods.

5. Flexible Trading Strategies
Not only can you go long, but you can also short via inverse ETFs, profiting or hedging during market downturns.

Risks You Must Know

Don’t be fooled by “easier”—the risks of Bitcoin ETFs haven’t disappeared:

1. Price Volatility Remains Intense
Bitcoin is inherently “volatile,” with daily drops exceeding 10% common. If you’re sensitive to fluctuations or need the money soon, exercise caution.

2. ETF Price May Deviate from Spot
Due to management fees, trading time differences, or market premiums/discounts, ETF prices may not track the spot market perfectly. Especially on weekends when US markets are closed, large price gaps are normal.

3. Regulatory Policies Are Still Evolving
The overall Bitcoin market is still developing, with inconsistent regulations across countries. In extreme cases, market volatility could be beyond expectations.

Core Reminder: Don’t confuse ETFs with stock ETFs. Their leverage, valuation basis, and operation methods differ greatly. Always carefully assess your risk tolerance before investing.

Common Bitcoin ETF Listings

Five Questions Every Beginner Asks

Q1: Is Bitcoin ETF safe?
A1: Compared to directly buying Bitcoin, ETFs are indeed safer. Protected by professional custody and strict regulation, they reduce the risks associated with traditional Bitcoin investments.

Q2: Are there other crypto ETFs?
A2: Yes, Ethereum spot ETFs have been launched, with similar investment methods; other coins are still under observation in the short term.

Q3: For long-term investment, should I choose spot ETF or futures ETF?
A3: Spot ETFs are more suitable for long-term holding—lower costs and no missed gains. Futures ETFs are better for short-term trading, but holding long-term may erode profits due to rollover costs.

Q4: Are Bitcoin ETFs management fees high?
A4: Fees vary by issuer, generally between 0.2% and 0.95%. Spot ETFs tend to have lower management fees than futures ETFs.

Q5: Can I buy Bitcoin ETFs through Gate.io?
A5: Gate.io mainly offers spot and contract trading. To buy ETFs listed in the US, you need to go through overseas brokers or discretionary trust channels.

Final Advice

The emergence of Bitcoin ETFs indeed makes crypto asset investment more accessible, but it doesn’t mean you can “invest blindly.” Before starting, please:

1. Understand your risk tolerance—Bitcoin isn’t suitable for everyone
2. Evaluate your fund’s purpose—Will you need this money in the short term?
3. Develop an investment plan—Long-term allocation or short-term trading?
4. Start small—Use small amounts to learn and gradually increase your position
5. Review regularly—Monitor your portfolio periodically and manage risks

Bitcoin ETFs are a great entry point into the crypto world, but always remember: simpler methods do not mean lower risks.