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Crypto ETFs, or cryptocurrency exchange-traded funds, are investment vehicles that track the performance of various cryptocurrencies such as Bitcoin or Ethereum. They allow investors to gain exposure to these digital assets without actually owning them directly.
Like other ETFs, crypto ETFs in Canada can be bought and sold on exchanges just like stocks. They offer a convenient and potentially safer way to invest in cryptocurrency, as they are regulated by financial authorities and are subject to oversight. However, they also come with their own set of risks, such as market volatility and the potential for fraud.
There are both Bitcoin ETFs and Ether ETF you can buy to ensure you get exposure to the cryptocurrency you believe in. Cryptocurrency ETFs are great for retirement accounts as they can help you reduce your tax bill.
What Are ETFs?
ETFs in Canada are financial vehicles that hold various securities, including equities, bonds, and now crypto. ETFs, give investors an easy and affordable option to diversify their portfolio, which is one of their key benefits.
An investor can expose themselves to various investments with a single purchase of an ETF because it owns a basket of assets. In addition, ETFs may lower risk due to the diversification they provide across various asset classes, depending on the ETF’s goals.
The easy diversification of ETFs is not free, so they charge a management expense ratio to pay the fund manager.
ETFs trade like any other stock on the Toronto stock exchange, and now there are even crypto ETFs like Bitcoin ETFs and Ether ETFs.
What Is Cryptocurrency?
Cryptocurrency is a digital currency that uses cryptography for security. Crypto assets are decentralized, meaning any government or financial institution does not control them. Depending on the type of crypto, they rely on computers or stakers to provide liquidity and keep the blockchain functioning.
One of their key advantages is the level of anonymity that cryptocurrencies provide for consumers. On the blockchain, transactions are recorded, but the names of the parties involved are hidden. Because of this, they are well-liked by those who desire to conduct financial transactions anonymously.
It is important to note that crypto assets are relatively new and volatile, so you must research the crypto market before investing.
Different Types of Cryptocurrency
There are many different types of cryptocurrency, and now there are even cryptocurrency ETFs. The most popular cryptocurrencies include Bitcoin and Ether.
Bitcoin
With no need for a centralized entity, peer-to-peer transactions can be conducted using the decentralized digital currency Bitcoin. It was developed in 2009 under the pseudonym Satoshi Nakamoto by an unidentified person or group of persons.
Bitcoins are stored in digital wallets and can be used to purchase goods and services or traded on exchanges for fiat currencies or other cryptocurrencies. The blockchain, a public ledger where transactions are recorded, enables anybody to observe a specific Bitcoin transaction history.
The restricted supply of Bitcoin is one of its key benefits. Only 21 million Bitcoins will ever be created, and as more people start using them, the price of each Bitcoin should theoretically rise. This has made it a well-liked investment for individuals trying to make predictions about the future of currency.
Ether
Ether, otherwise known as Ethereum, is a decentralized open-source blockchain technology that allows for the use of smart contracts. Smart contracts are applications that run on the blockchain without any possibility of interference or fraud.
Ether is the token used on the Ethereum blockchain. Ether is used to facilitate transactions on the network and may be bought and sold like any other cryptocurrency.
Ethereum allows developers to build and deploy their own dApps (decentralized applications) that can be used in various ways, like creating a new voting system or even an entirely new cryptocurrency.
What Are Crypto ETFs?
Crypto ETFs, or cryptocurrency exchange-traded funds, are investment vehicles that track the performance of a specific cryptocurrency or a basket of cryptocurrencies. Essentially, they allow investors to easily invest in the cryptocurrency market without directly purchasing and holding the actual digital assets.
The best crypto ETFs in Canada primarily focus on Bitcoin and Ether since they are the most popular cryptocurrencies. Buying a crypto ETF has the advantage of potentially being a part of your retirement portfolio allocation to reduce your tax bill.
The Evolve cryptocurrencies ETF gives you exposure to both Bitcoin and Ether in a single ETF. Before buying a crypto ETF, you should ensure you understand the industry well enough to have the conviction to hold through market volatility.
Bitcoin ETFs
The Purpose Bitcoin ETF is the world’s first Bitcoin ETF that allows you to purchase real Bitcoin, not just another Bitcoin futures ETF. No wallet is required, and it is available to hold in your TFSA or RRSP to save on taxes.
The Evolve Bitcoin ETF provides investors with exposure to Bitcoin’s daily price movements with minimal tracking error. The fund invests directly in Bitcoin with its holdings of Bitcoin priced based on the CME CF Bitcoin Reference Rate.
The Fidelity Advantage Bitcoin ETF allows investors to gain exposure to Bitcoin without using a wallet and provides safe storage backed by Fidelity.
The CI Galaxy Bitcoin ETF is an ETF available to Canadian investors that provides exposure to Bitcoin.
Overall, a Bitcoin ETF is a great addition to your investment portfolio if you believe in the future of blockchain technology.
Ether ETFs
The Evolve Ether ETF is the world’s first Ether ETF and provides investors with a simple way to gain exposure to the Ethereum network. The fund is also TFSA and RRSP eligible, meaning you can save on taxes.
Investing in an Ether ETF is an easy way to gain exposure to the Ethereum network without the worry of creating a wallet to store your coins. Before investing directly in an Ether ETF, you should research the technology to ensure an Ether ETF is right for your investment portfolio.
Crypto ETFs in Canada | Bottom Line
Crypto ETFs (exchange-traded funds) are a type of investment that allows individuals to invest in a basket of cryptocurrency assets rather than purchasing and managing individual cryptocurrencies themselves.
They can be a good investment option for beginners in Canada because they offer a level of diversification and ease of management that may be attractive to those new to the world of cryptocurrency. You can invest in an Ether ETF or a Bitcoin ETF in Canada.
It is crucial to remember that due to the high volatility and unpredictable nature of the cryptocurrency market, crypto ETFs do carry some risks and uncertainties. Beginners should exercise due diligence and research the particular crypto ETF they are thinking about before making a decision, as with any investment.
It’s a good idea to consult a financial counselor or other experts to see if investing in crypto ETFs is a good idea for your particular situation.
