The launch of Bitcoin ETFs in the US has created a lot of buzz. These products make Bitcoin investing as simple as buying a stock.
Here in Belgium, though, we can't access these US ETFs. And when we looked into our options, we found that the information available for Belgian investors was scattered and often confusing.
That's why we've created this straightforward guide to buying Bitcoin ETPs - Europe's equivalent to ETFs. We'll show you exactly what they are, how to buy them, and why they might (or might not) deserve a small place in your investment portfolio.
Bitcoin ETP, not Bitcoin ETF
First, let's get a technicality straight. The EU currently only allows ETPs (Exchange-Traded Products) tracking Bitcoin, not ETFs. Though they function like ETFs, their structure has some key differences. But the practical differences are minimal to us as investors. So in the rest of the article, we will talk about Bitcoin ETPs rather than Bitcoin ETFs.
Why invest in Bitcoin through an ETP?
Think of a Bitcoin ETP as a way to get Bitcoin exposure through your regular investment account. You buy shares in a fund that holds Bitcoin for you. This way, you skip the hassle of cryptocurrency exchanges and digital wallets. It's like having someone else take care of the hard work. You can then focus on investing.
There are some key advantages to investing in Bitcoin through an ETP:
- You don’t have to worry about storing Bitcoin or managing private keys. The fund provider takes care of everything.
- You can buy and sell shares in your regular investment account, like any other ETF.
- Regulators oversee your investment. Professional custodians keep the Bitcoin safe, which adds security.
The best Bitcoin ETPs
There are a few things to look out for when choosing a Bitcoin ETP.
Cost (TER)
Fund managers charge a fee for managing their funds. The total expense ratio (TER) indicates the total cost of a fund. They deduct it from the fund's performance. So, when you look at a fund's performance, it is usually net of fees.
We can see on justETF that the price of Bitcoin ETPs ranges from 0.20% for some recent ETPs, to 2.00% (which is very expensive!).
Size of the fund
You want an investment that is viable for the long run. So, you want to avoid an ETP shutting down soon after your investment. As ETPs must reach a certain size to become viable, a larger fund is less likely to shut down. Also, larger funds are easier to buy and sell because there are more players in the market. The spread between the buy and sale price is smaller. A good rule is to only consider ETPs with at least €100 million.
If an ETP is liquidated, you do not lose your money, which is an important thing to note. In fact, the ETP's assets are still worth their market value. So, you’ll receive that value when they sell them.
Best Bitcoin ETPs
The cheapest Bitcoin ETP is Bitwise Core Bitcoin ETP, with a TER of 0.20%. The downside is that the fund is still small since it was created recently. 21Shares and CoinShares offer solid choices if you want a larger fund at a fair price.
How to buy your first Bitcoin ETP
There are a few steps to buy a Bitcoin ETP:
- Open an account with a broker.
- Choose the Bitcoin ETP you wish to buy.
- Choose the stock exchange on which to buy the ETP.
- Hit "Buy"!
Let's look into the steps in more detail.
Open an account with a broker
First things first – you'll need a broker that gives you access to European exchanges. Not all brokers offer Bitcoin ETPs (remember, in Europe we have ETPs rather than ETFs), so you'll want to check this first.
For beginners, using a Belgian broker like Saxo or Bolero is helpful. They take care of all taxes and admin tasks for you. This is not the case for foreign brokers, where they shift all this responsibility onto you. For instance, many Belgian Trade Republic customers don't know they must declare their foreign account. They also need to declare and pay the TOB. Plus, they must declare dividend taxes and tax on interest on their uninvested cash.
Check out our resource to find the best broker for you.
Choose the Bitcoin ETP you wish to buy
Make a choice among our selection above, or any other you wish. justETF is a great resource to find Bitcoin ETPs available in Europe.
Choose the stock exchange on which to buy the ETP
Most Bitcoin ETPs trade on several stock exchanges. Examples of stock exchanges are Euronext Amsterdam and the German XETRA. The choice often depends on:
- Which exchanges your broker gives you access to. Not all brokers give you access to all stock exchanges.
- Trading fees for different exchanges. Bolero charges more for trades on XETRA than on Euronext exchanges.
- Trading volume on each exchange. Pro tip: XETRA usually has the highest trading volumes for Bitcoin ETPs. This often leads to better prices and easier trading.
Hit "Buy"!
You're almost there. Now you need to choose how many units of the ETP you want to buy, as well as the type of order (market order, limit order, etc.). Then hit "Buy," and congratulations, you bought your first Bitcoin ETP!
Bitcoin should be only a component of a diversified portfolio
Let's be real: Bitcoin is exciting. When it makes headlines with massive price jumps, it's tempting to want to go all in. Putting all your money in Bitcoin is like betting your whole future on one die roll.
Why diversification matters
Think of your investment portfolio like your favourite playlist. Sure, you might love that one hit song, but listening to it on repeat for 8 hours straight? Not so great. Investing works the same way. Spreading your money across different investments helps protect you. If one investment fails, you’re still safe.
How much Bitcoin is reasonable?
Most financial experts recommend limiting your Bitcoin exposure to 1-5% of your total portfolio. Even crypto enthusiasts often recommend not going above 10%. Why? Because Bitcoin's price swings can be wild, as we can see in its price evolution below. In 2022 alone, Bitcoin lost over 60% of its value. Imagine if that were all your savings!
Your portfolio should have:
- Broad market stock index funds, which are the backbone of your investments.
- Bond funds, important as you near your investment goals.
- Cash for emergencies and short-term needs.
Invest in a strong core portfolio with Curvo
Jumping into Bitcoin without a solid investment foundation is like running a marathon without knowing how to walk. That's why at Curvo, we help you build a strong core portfolio first. Each Curvo portfolio consists of globally diversified index funds of stocks and bonds. Once that's in place, you can think about adding some Bitcoin exposure if it aligns with your goals.
The best investors don't make risky bets on one asset. Instead, they stay diversified. They also follow their strategy, no matter how the market changes. Want to learn more about building a resilient, diversified portfolio? Find out how Curvo works.
Our conclusion
Bitcoin ETPs give you an easier, regulated way to add cryptocurrency to your investment portfolio. You avoid the complexities of crypto wallets while getting the same exposure to Bitcoin's price movements. But remember: Bitcoin should only be a small part of your investment strategy, ideally not more than 5% of your portfolio.
Before diving into Bitcoin, make sure you have a strong foundation of diversified investments. If you're unsure how to build that foundation, Curvo can help you create a globally diversified portfolio of stocks and bonds that matches your goals. Then, if you choose to, you can add a Bitcoin ETP to spice things up.