Acorn's Crypto Investment Strategy: Pros And Cons

Investing in cryptocurrency has become an increasingly popular endeavour, with many people looking for ways to invest in cryptocurrencies without putting down large amounts of cash. While Acorns does not directly invest in cryptocurrency, it does offer a Bitcoin exchange-traded fund (ETF) called Proshares Bitcoin Strategy, which trades under the ticker symbol BITO. This ETF trades Bitcoin futures contracts and attempts to provide exposure to Bitcoin pricing without the need for a digital wallet. Additionally, Acorns allows users to personalize their investments with a Bitcoin-linked ETF and a Custom Portfolio option, allowing for further diversification.

Acorns offers a Bitcoin ETF called Proshares Bitcoin Strategy

Acorns is a micro-investment app that allows users to invest their spare change. The app has now expanded to include a Bitcoin ETF called Proshares Bitcoin Strategy, which trades under the ticker symbol BITO. This ETF trades Bitcoin Futures contracts to provide exposure to Bitcoin pricing.

By investing in a Bitcoin ETF, users are not investing directly in Bitcoin. Instead, they are investing in a fund that tracks the value of Bitcoin and trades on a traditional market exchange. The advantage of this is that there are no transaction fees, and the management fees are typically under 1%. Additionally, a digital wallet is not required to invest in a Bitcoin ETF.

The Acorns app provides an easy and accessible way for users to invest in Bitcoin and offers a more diversified approach to investing. Bitcoin is a decentralised digital currency that is not owned or operated by any nation or government. It exists in a different asset class to stocks or bonds, and its value tends to have a low correlation with these assets over the long term. This means that investing in Bitcoin can help to balance out the performance of other assets in an investment portfolio.

The Proshares Bitcoin Strategy ETF offered by Acorns provides a simple and low-cost way for users to gain exposure to the Bitcoin market, making it a convenient option for those looking to diversify their investments.

The ETF trades Bitcoin Futures contracts to provide exposure to Bitcoin pricing

The ProShares Bitcoin Strategy ETF (BITO) is a Bitcoin exchange-traded fund (ETF) that trades Bitcoin Futures contracts. This ETF is traded on the Chicago Mercantile Exchange and is designed to provide investors with exposure to Bitcoin pricing without needing to own the cryptocurrency.

ETFs are investment companies regulated by the SEC. They hold assets and issue securities as shares of the fund, which are traded on an exchange. Bitcoin futures ETFs specifically aim to offer exposure to the price movements of Bitcoin.

The ProShares Bitcoin Strategy ETF is an actively managed fund that holds Bitcoin futures contracts. These contracts are traded on a regulated exchange and are subject to the rules and regulations set forth by the Commodities Futures Trading Commission (CFTC). The ETF attempts to closely mimic the price and performance of Bitcoin.

By investing in the ProShares Bitcoin Strategy ETF, investors can gain exposure to the potential value of Bitcoin without needing to own the cryptocurrency directly. The ETF provides a familiar investment type that eliminates the need for security procedures and excessive funds associated with buying Bitcoin directly.

It is important to note that investing in Bitcoin and Bitcoin futures ETFs carries risks due to the highly volatile nature of cryptocurrencies. The performance of the ETF may not always match the exact current value of Bitcoin due to factors such as management fees, transaction costs, and logistic issues.

Investing in Bitcoin vs a Bitcoin ETF

Investing in Bitcoin or a Bitcoin ETF are two very different things. Both have their advantages and disadvantages, and the decision between the two will come down to personal preference and technological savvy.

Investing in Bitcoin

Investing in Bitcoin means that you own individual Bitcoin, which is traded on a cryptocurrency exchange. This gives you complete control over your private keys, and you can store your assets in a secure hardware or software wallet of your choice. This eliminates the need to trust a third-party custodian or intermediary to hold your Bitcoin on your behalf, reducing the risk of hacking, fraud, or other security breaches. You can also send Bitcoin to other individuals anywhere in the world as payment, and there are new and innovative applications being developed to leverage Bitcoin further.

However, trading individual Bitcoin comes with transaction fees that are typically between 2-6%. You will also need a digital wallet to store your Bitcoin, for which you will need a password that cannot be lost or forgotten. Bitcoin does not have a support line or password reset function.

Investing in a Bitcoin ETF

Investing in a Bitcoin exchange-traded fund, or ETF, means that you are not investing in individual Bitcoin. Instead, you are investing in a fund that tracks the value of Bitcoin and trades on a traditional market exchange, like the Nasdaq. In other words, the ETF attempts to closely mimic the price and performance of Bitcoin. There are no transaction fees with an ETF, and they typically charge a management fee of less than 1%.

You do not need a digital wallet to invest in a Bitcoin ETF, and they are much easier to invest in than Bitcoin. However, you are not provided with actual Bitcoins, and you are limited to the set trading hours of the exchange, Monday through Friday, from 9:30 a.m. to 4 p.m. East Coast time.

Acorn's Bitcoin ETF

The Bitcoin ETF offered through Acorns is called Proshares Bitcoin Strategy and trades under the ticker symbol BITO. This ETF trades Bitcoin Futures contracts in an attempt to provide exposure to Bitcoin pricing.

Bitcoin is decentralised and not owned or operated by any government

Bitcoin is a decentralised cryptocurrency, meaning it is not owned or operated by any nation or government. It is a peer-to-peer system, where transactions are verified through cryptography and recorded in a public distributed ledger, called a blockchain, without central oversight.

Bitcoin's decentralised nature has several implications for its use. Firstly, it cannot be regulated by governments, which can view it as a threat to their authority and the existing financial system. Bitcoin also enables users to circumvent capital controls imposed by governments, as it is stateless in nature. This feature has been leveraged by citizens in countries with strict capital controls, such as China, to transfer wealth across borders.

Additionally, Bitcoin's decentralisation means that it is not tied to the performance of any particular stock or asset class. This can make it a useful tool for diversifying an investment portfolio. However, it is important to note that Bitcoin's price is highly volatile and it has been described as an economic bubble by some economists.

The decentralised nature of Bitcoin also has implications for security and ownership. On the one hand, the absence of central oversight can make it more difficult to trace transactions and identify users, which has led to its use in illicit activities. On the other hand, losing access to one's private key means losing access to one's Bitcoins, with no possibility of recovery.

While Bitcoin is decentralised in the sense that it is not controlled by any central authority, it is worth noting that the computing power required for mining Bitcoin is concentrated in the hands of a few entities, giving them significant influence over the direction of the cryptocurrency. This has led some to argue that Bitcoin is not truly decentralised.

Bitcoin is in a different asset class to stocks or bonds

Bitcoin is a cryptocurrency, a form of currency that only exists digitally. It is decentralised, meaning it is not owned or operated by any nation or government. Bitcoin is also the largest cryptocurrency, with its value fluctuating dramatically since its creation in 2009.

The performance of stocks and bonds is often tied to the performance of the companies or governments they are tied to. Stocks let you own a small piece of a public company, meaning your investment rises and falls based on the performance of that company. Bonds are loans made to a company, government, or other entity that must be paid back by a certain date with interest.

Bitcoin, on the other hand, is not tied to the performance of any one company or government. Its value is based on supply and demand dynamics rather than profitability. This means that when the price of stocks goes up or down, it doesn't necessarily influence the value of Bitcoin.

Because of these differences, including Bitcoin in a portfolio that also contains stocks and bonds can help balance out the overall performance.

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