Bitcoin Investment Vehicles: BTC Products Available in 2022

Paigambar Mohan Raj

An investment vehicle is an asset into which investors pour money in hopes of the said asset increasing in value. Securities like stocks and bonds, as well as investments like mutual funds and EFTs, are some examples of investment vehicles. Now such investment vehicles are not limited to TradFi (Traditional Finance). There are crypto-related investment vehicles in the DeFi industry solely made up of digital assets. Bitcoin (BTC) has been the best-performing asset in the last decade, despite being at two-year lows. Hence, BTC is a part of many crypto investment vehicles.

On the strength of demand from individual investors, Bitcoin saw an unchallenged bull run in 2017, with its price surging by more than 900% in a single year. By 2020, institutional investors began to see its potential, and publicly traded firms started employing it for treasury management, driving its price to record highs. Investor interest in financial products that offer exposure to BTC has increased because of these developments.

Investment vehicles for Bitcoin (BTC)

Proshares Bitcoin Strategy ETF (BITO): BITO is an ETF (exchange-traded fund) that monitors the price of BTC. On October 19, 2021, BITO became the first BTC-based ETF in the U.S. and began trading on the NYSE ARCA platform. Shares of BITO can be purchased directly from the fund company by investors or through a brokerage.

The BITO ETF can give individual investors easy, indirect access to BTC as ETFs are financial vehicles that can be bought and sold on an exchange like equities. ProShares Bitcoin ETF is a futures ETF. Thus, it does not own BTC itself. Instead, it holds futures contracts, giving it access to bitcoin price exposure without owning the cryptocurrency.

ProShares Short Bitcoin ETF (BITI): While BITO grows with an increase in BTC prices, BITI gains from BTC’s price decline. Investors anticipating a fall in BTC’s price could make a profit or hedge their holdings using BITI. BITI enables investors to gain short exposure to BTC. Again, the asset holds a futures contract and not any actual BTC.

However, short BTC returns fell into negative territory even though the price of Bitcoin was falling.

Grayscale Bitcoin Trust (GBTC): This fund was started in 2013 by Alternative Currency Asset Management, but is currently sponsored by Grayscale Investments LLC. It started open market trading in 2015 with the ticker GBTC. The fund’s goal is to monitor Bitcoin’s fundamental underlying value. The trust is exclusively available to authorized investors and institutional investors, with a minimum investment amount of $50,000.

Other BTC investment vehicles

Bitwise 10 Crypto Index Fund (BITW): The Bitwise 10 Crypto Index Fund (BITW), created by Bitwise Asset Management, made its debut in the second half of 2020. BITW does not grant indirect ownership of Bitcoin, in contrast to GBTC. Instead, it follows another Bitwise product called the Bitwise 10 Large Cap Crypto Index, which aims to expose investors to 80% of the cryptocurrency industry. At press time, BTC represented more than half of the fund’s assets, making up 63.4% of the total.

Osprey Bitcoin Trust (OBTC): As an investment instrument, The Osprey Bitcoin Trust (OBTC) debuted in 2019’s private markets. However, it wasn’t open to the general public until February 2021. Coin Metrics Bletchley Indexes are monitored by the trust (CMBI).

CMBI benchmarks were introduced in 2015 to keep tabs on Bitcoin and Ethereum prices. Greg King, the founder of Osprey, listed two characteristics of the trust that set it apart from other products. The first is Coinbase serving as its custodian. Its pricing is the second and more significant attribute. Osprey differentiates itself from other trusts by charging cheaper management fees—roughly 0.49%.

Bitcoin Bakkt Futures: Bakkt is a custodian service that stores BTC in cold storage. The platform gives conventional investors a way to invest in BTC with US federal regulatory control. Intercontinental Exchange (ICE), the organization behind the New York Stock Exchange (NYSE), owns Bakkt. ICE provides a Bitcoin futures product under the Bakkt brand. Here, traders may wager on the direction of the price of Bitcoin. The amount of BTC used to support the deals is kept in Bakkt’s safe custody.