INVESTING IN BITCOIN WITH iSHARES

Learn more about investing in bitcoin and the benefits of using an exchange-traded product like IBIT.

EXPLORE IBIT

The iShares Bitcoin Trust ETF is not an investment company registered under the Investment Company Act of 1940, and therefore is not subject to the same regulatory requirements as mutual funds or ETFs registered under the Investment Company Act of 1940.

UNDERSTANDING BITCOIN

Bitcoin is the world’s most recognized and widely adopted cryptocurrency1 — and the first form of internet-native money to gain widespread global adoption. Bitcoin allows for peer-to-peer transactions outside of central intermediaries like banks. 

There is no physical form of bitcoin; it is solely a digital currency. Additionally, some people see it as a global monetary alternative.

Bitcoin is a decentralized digital asset and one of the foremost applications of blockchain technology. The blockchain is a public, digital database of transactions maintained by a distributed network without a centralized authority. Leveraging the blockchain, bitcoin enables peer-to-peer transactions and ensures the fidelity and security of each transaction without the need of central intermediaries, like banks or clearinghouses.

Bitcoin transactions are validated and new bitcoins are created through a process known as “mining,” during which computers or “miners” race to solve complex mathematical computations. The winning miner updates the blockchain with the latest verified transactions and earns a predetermined amount of new bitcoin generated by the network.

The bitcoins are then held or traded based on supply and demand, which determine the value or dollar price of bitcoin similar to other commodities or assets. Bitcoins are stored in crypto wallets, which are also used to send and receive bitcoin. Each wallet contains a private key that allows you to send bitcoin to complete a transaction, and a public key that allows you to receive bitcoin.

According to bitcoin code, there is a maximum supply of 21 million coins and no new bitcoins will be released after that limit is reached.2 As of January 2024, there are around 19.6 million bitcoins in circulation, and 1.4 million left to be rewarded. This limited supply is one of bitcoin’s key characteristics, which was designed to increase scarcity — and therefore demand — over time.

Cryptocurrencies like bitcoin have enabled a way for secure transactions to be conducted directly between two parties without the need for an intermediary (e.g., a bank) anywhere in the world. It addresses three centuries-old problems that money and payment systems have faced:

  • Transacting across borders: bitcoin and its blockchain-based framework enabled a global “internet of value,” where assets can be moved quickly and seamlessly at low cost.
  • Open access financial system: bitcoin is available to anyone with a mobile phone and an internet connection. Its open access nature means that bitcoin can help enable more people to participate in the global financial system who may not have full access to traditional banking networks, or who are limited by their own country-specific infrastructure.
  • Fixed supply not subject to inflation: bitcoin is a scarce asset, with a supply fixed at 21 million units. Supply of traditional government-issued currencies can be arbitrarily increased, leading to inflation. Bitcoin’s supply grows at a predictable rate, and because of its decentralized nature, its supply is near impossible to alter.

Driving the demand for a bitcoin ETP is the fact that many investors view bitcoin as more than just a form of digital payment. 

There are certain trends accelerating bitcoin’s adoption as well:

  • Global monetary alternative: A scarce, decentralized, global monetary alternative that may benefit from increasing global disorder, and declining trust in institutions and government-issued fiat currencies.
  • Geopolitical and monetary hedge: An expression on increasing global disorder and declining trust in governments, banks, and fiat currencies.
  • Blockchain adoption: As the leading cyptoasset1, bitcoin’s performance is seen by many as a key indicator of overall blockchain adoption. 

INVESTING IN BITCOIN ETPs

A bitcoin exchange-traded product (ETP) is an investment vehicle that provides exposure by investing directly in bitcoin. Bitcoin ETPs offer the ease of stock trading, low costs, tax efficiency, and convenience.

As bitcoin has grown in popularity, so have the investment options. One of the ways investors can invest directly in bitcoin is through iShares Bitcoin Trust ETF (IBIT). But for investors who prefer the convenience of exchange-traded products, the iShares Bitcoin Trust ETF (IBIT) provides exposure through traditional brokerage platforms — the same place you purchase stocks, bonds, and other ETFs.

We recommend you consult with a financial professional to determine if an investment in bitcoin aligns with your personal investment goals. There are several factors to consider. Bitcoin has had periods of significant outperformance relative to major asset classes since its inception, but it has come with significant volatility.3

Investors with a higher risk tolerance may be inclined to allocate more of their portfolio to bitcoin. Every investor’s situation and goals are unique.

Bitcoin is subject to the same tax laws as property. The IRS requires reporting of each bitcoin transaction, which is subject to capital gains tax.4 Investors should consult a tax or financial professional for more information on how they may be impacted by bitcoin tax laws.

IBIT is fully invested in bitcoin outside of a minimal cash allocation. While market forces can cause modest deviations between IBIT’s share price and its net asset value (NAV), its structure is designed to help minimize these differences.5

Bitcoin is a highly volatile asset exhibiting significant price swings in both directions since its inception in 2009 and may not be suitable for certain investors. Like any investment, there are inherent risks involved with investing in a spot bitcoin exchange-traded product and at large concentrations, bitcoin’s volatility can have a large impact on overall portfolio risk.

Bitcoin exchange-traded products (ETPs) help alleviate some of the challenges of investing directly in bitcoin, such as storage. Traditional forms of investing directly in bitcoin require deciding where to store the purchased bitcoin, which can be in a crypto wallet or on a crypto exchange. This approach gives the investor certain direct responsibilities in preventing security risks such as theft or loss of private keys, which are essentially passcodes to a crypto wallet. With a bitcoin ETP, investors own shares of the ETP, removing the need to determine where to store their bitcoin, as this is handled by the ETP's custodian. It is important to note, however, that investing in a bitcoin ETP still involves risk, including possible loss to principal.