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Bitcoin ETF in a Self-Directed IRA

bitcoin etf

Changes are coming fast in the cryptocurrency world. Starting this week, clients will be able to hold a new Bitcoin ETF in their Midland self-directed IRA. The best part is that it is easy to set up.

Bitcoin ETF Launch

Bitcoin is making headways once again as it crosses $60,000 and passes its all-time highs. The recently strong, steady moves in the Bitcoin market are possibly due to the SEC approving the first Bitcoin futures ETF on October 15, 2021. Bitcoin exchange-traded funds (ETF) will make its debut on Tuesday, October 19, 2021, on the NYSE.

As Neil Armstrong stated during the moon landing, “That’s one small step for man, one giant leap for mankind.” This is one small step for Bitcoin, one giant leap for Bitcoin regulations (but in a good way for Bitcoin investors).

The much-anticipated ETF from ProShares will track the Bitcoin futures market and officially debut on Tuesday. It will begin trading on October 19, 2021, on the NYSE under the ticker “BITO.” Three other Bitcoin futures ETFs are expecting to move forward with their launches this month, with talk of Invesco’s coming as soon as this week.

[For a Midland client to hold an ETF in Bitcoin, Midland will set the client up with a brokerage account at TD Ameritrade or TradeStation. This account allows the client to buy and sell this new ETF as they wish. The accounts are easy to set up. Please get in touch with the trading department to get started ASAP.]

What Are Bitcoin ETFs?

An ETF is an exchange-traded fund that tracks the price of a basket of underlying assets and is tradeable on the US Stock exchanges. In this case, the ETF will track the price of Bitcoin futures trading on the Chicago Mercantile Exchange (CME) rather than Bitcoin itself.

Why Are The Bitcoin ETFs “Futures” Based?

The Bitcoin ETF will not actually hold Bitcoin. Instead, they will deal with Bitcoin futures, which trade separately on regulated US exchanges such as the CME.

Allowing ETFs for Bitcoin may be one of the biggest endorsements from the SEC for crypto to date. The crypto industry has been at odds with regulators for years. Since 2017 several asset managers have sought to launch a Bitcoin ETF. All were rejected by the SEC (Securities and Exchange Commission). But things changed in an August speech as Gary Gensler of SEC said he would favor investment vehicles, including futures.

Regulators prefer future-based ETFs for Bitcoin because the SEC lacks jurisdiction over crypto trading venues that aren’t registered as exchanges in the US. The SEC feels this leaves investors vulnerable to fraud and manipulation because regulations have no insight into where Bitcoin is coming from or how the prices are being determined.

Pros of Bitcoin ETF

  • Easy way to gain exposure to Bitcoin without having to have money leave your brokerage account
  • Small step to making Bitcoin more widely accepted
  • Makes it easier for institutional investors to get exposure

Cons of Bitcoin ETF

  • ETF have fees of approximately .5%
  • You don’t own or hold the actual Bitcoin

What Does This Mean for Midland IRA Clients?

Getting exposure to Bitcoin is easier than ever. You no longer need to set up a futures account or cryptocurrency account if you want exposure to Bitcoin. All you need is a brokerage account you can buy stocks with! The new Bitcoin ETF can be bought and sold in the same manner you do stocks.

Although Midland is not a brokerage, clients can open a brokerage account with Midland through either TD Ameritrade or TradeStation. Please get in touch with us at (239) 333-4464 or [email protected].

Andy Anger, Team Lead in Client Services

Written by Andy Anger

Team Lead in Client Services