Should Indians Invest in US Listed Bitcoin ETFs?

The fund, which trades on the NYSE under the ticker symbol BITO, does not invest directly in bitcoin, but primarily seeks to provide capital appreciation through managed exposure to bitcoin futures contracts.

BITO has become one of the most sought-after funds, as it has become the fastest ETF to reach the $1 billion mark in assets under management (AUM). The fund has raked in more than $2 billion since its launch on Tuesday. It is also available for Indian investors with US brokerage accounts. Over time, other bitcoin or crypto ETFs may become equally accessible in the US.

According to Viraj Nanda, CEO, Globalize, a platform for directed global investments, Indians need to have access to US markets to be able to purchase US-listed instruments.

“For this, they will need a US brokerage account, which can be opened with providers like Globalize. After opening a US brokerage account, this process requires clients to remit money under the LRS route. Once money is sent to a brokerage account, it is held as cash in dollars. The customer can then choose to invest this money in any instrument in the US,” said Nanda. LRS stands for Liberalized Remittance Scheme

Under the LRS, an Indian individual can remit up to $250,000 per year for travel, education and medical care as well as for the purchase of shares.

When investing in futures-based ETFs, experts believe that since the US ETF market is more developed, liquidity will not be an issue.

“Once ETFs come along, a lot of pension funds and retirement funds can put them in their portfolios. There will be a lot of capital to pile on. Grayscale has applied for ETFs as well and they basically Spots are confirming ETFs, said Amit Kumar Gupta, New Delhi-based portfolio manager at Adroit Financial Services Pvt Ltd., once Spot is there that is linked to physical bitcoin, and benchmarking will become much easier. SEBI-registered portfolio management firm.

US-based Grayscale Investments LLC is the world’s largest digital asset manager with an AUM of over $52 billion. “The ETF will invite a lot of institutional interest,” said Siddhartha Sogni, founder and CEO of Crabaco Global, a research, ratings and intelligence company focused on blockchain and cryptocurrencies.

“Bitcoin requires a lot of maintenance. An investor can forget the key, there are liquidations as well as hacking issues. ETFs can take away all of these hassles,” Sogny said.

However, remember that an increase in the price of bitcoin may not result in a corresponding increase in the value of fundholding positions in bitcoin futures contracts.

For retail investors, Sogni suggests that owning an actual stake in the blockchain is more important. “For long-term retail investors, going straight to bitcoin makes more sense, as ETFs are basically designed for institutional investors,” the expert said.

Investors should remember that bitcoin ETFs listed in the US are better regulated, but may involve higher operating expenses than direct bitcoin purchases. For example, the ProShares Bitcoin Strategy ETF has an expense ratio of 95 basis points. On the other hand, the average expense ratio of ETFs in India is less than 20 bps. There may also be costs involved in maintaining US brokerage accounts opened on global investment platforms.

Additionally, bitcoin futures ETFs are highly speculative products and can see bouts of high volatility.

For investors looking to invest in bitcoin, Gupta suggests that bitcoin could move towards the $71-72,000 level in the near term, and then we have some retracements. “For retail investors, SIP is a more suitable mode of investment, with the caution that it should not exceed 5% of your asset allocation,” Gupta said.

Sogni also thinks that Bitcoin could extend the current rally to the $85,000-100,000 level and then see a correction around 20-25%.

Before investing in bitcoin, investors should consider the level of risk they are taking in comparison to the level of risk they are comfortable with. Furthermore, bitcoin futures ETFs carry increased risk compared to other funds, and it is important to consider how any given investment fits into your overall investment plan.