Following Donald Trump’s election victory, financial markets experienced a flurry of trading activity, with investors increasingly turning to Bitcoin as a hedge amid heightened political uncertainty.
In Canada, more cautious investors turned to Bitcoin and cryptocurrency exchange-traded funds (ETFs). Crypto ETFs are accessible and offer investor security within a regulated environment. As a result, crypto ETFs in Canada surged in popularity in the last few years as an entry into the cryptocurrency world. While Bitcoin ETFs and cryptocurrency funds make it easier to participate in cryptocurrency investments, potential investors should consider both the advantages and risks associated with this type of investment.
Why crypto ETFs in Canada are attracting investors
Bitcoin ETFs — and crypto ETFs, in general — offer Canadians a straightforward way to gain exposure to price fluctuations in Bitcoin and cryptocurrency without directly purchasing or holding any particular cryptocurrency.
Traded on stock exchanges, these crypto ETFs allow individuals to buy and sell shares — as you would with traditional stocks. These crypto ETFs can be held in unregistered, cash accounts, as well as in tax-advantaged accounts like TFSAs or RRSPs.
This is particularly useful, at this point in time, as investors seek assets tied to Bitcoin’s performance and cryptocurrency, in general
Focus on crypto ETFs in Canada
In response to this demand, Canadian firms like Purpose Investments crafted Bitcoin ETFs with an emphasis on security and stability. Purpose Investment’s Bitcoin ETF (BTCC.TO), for example, employs “cold storage” — keeping Bitcoin assets offline to lower the risk of cyber attacks. This setup adheres to Canadian regulatory standards, offering investors additional safeguards typically absent in direct cryptocurrency purchases.
Read More: Pay $0 commissions and get started with crypto ETFs using Questrade trading platform
Benefits of Bitcoin and crypto ETFs: Combining accessibility with security
Bitcoin ETFs make crypto investment easier by eliminating the need for private wallets and technical knowledge, while also simplifying asset security. With Canadian regulatory oversight, these ETFs come with protections designed to reduce risks. For example, Purpose Investment stores the assets for its ETFs, including BTCC.TO, in offline cold storage and this storage can only be accessed by authorized custodians — a significant deterrent against online hacking.
For investors, Bitcoin and crypto ETFs in Canada also offer a potentially diversified approach to entering the crypto market. Some crypto ETFs incorporate a mix of digital assets, helping spread risk across multiple cryptocurrencies, which may reduce exposure to individual asset volatility.
Risks in Bitcoin ETF investing
While Bitcoin ETFs and crypto ETFs, in general, have grown in popularity, they remain susceptible to crypto’s characteristic volatility. Industry experts, such as Colin White of Verecan Capital Management, argue that cryptocurrency remains a speculative asset, subject to extreme price shifts. Bitcoin ETFs, including BTCC.TO, though diversified, do not eliminate the risks associated with high volatility in the crypto market.
Additionally, investors should consider ETF fees, which can reduce returns over time. Although ETFs that include a range of digital assets may help distribute risk, this structure does not fully shield investors from potential losses, especially in a turbulent crypto market.
Exploring crypto and Bitcoin ETFs in Canada: how to get started
Canadians interested in Bitcoin ETFs and cryptocurrency funds should consider these steps for getting started:
- Research available Bitcoin ETFs: Options such as Purpose Bitcoin ETF (BTCC.TO), Evolve Bitcoin ETF (EBIT.TO) , and CI Galaxy Bitcoin ETF (BTCX.TO) are listed on Canadian exchanges and offer various structures and security approaches.
- Compare ETF fees: Bitcoin ETFs — and generally most crypto ETFs in Canada — come with management fees, so you should consider how these fees may impact long-term returns.
- Evaluate security protocols: Check if the crypto ETF holds its assets in cold storage, and be clear about how the provider handles asset custody and protection.
- Align with financial goals: While Bitcoin ETFs make it easier to access crypto investments, they still carry risk. Aligning with one’s financial goals and risk tolerance is essential.
- Consider tax benefits: Holding Bitcoin ETFs and any crypto ETF in accounts like RRSPs or TFSAs can offer tax advantages, potentially reducing capital gains tax on returns.
Read More: Learn how to trade Bitcoin and other cryptocurrencies with the Money.ca guide on how to trade crypto
Bottom line: Crypto ETFs in a shifting financial landscape
Bitcoin ETFs offer Canadians a convenient and regulated way to participate in the cryptocurrency market, balancing accessibility with enhanced security measures like cold storage. As political developments drive renewed interest in Bitcoin, investors should be mindful of the risks posed by its volatility. For those who conduct thorough research and align their strategies with their financial objectives, Bitcoin and crypto ETFs could become a valuable part of their investment portfolio in today’s evolving economic environment.
This article Bitcoin ETFs see surge in interest after Trump election win drives investors to cryptocurrency originally appeared on Money.ca
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
