Summary iShares Bitcoin Trust ETF is one of the simplest ways to get exposure to Bitcoin. Bitcoin's halving cycle, which reduces the creation rate of new bitcoins, has historically led to price increases for 12-16 months after each halving event. If the historical pattern holds true, there could still be significant upside for Bitcoin, making the IBIT ETF an appealing option for long-term investors. As the "easy" part of the Bitcoin rally is seemingly over, a question arises: what investors should expect amid the upcoming Bitcoin halving? The BTC halving is by far the most important event of this year for Bitcoin, which has been historically bullish for the BTC price. Even though there are short-term risks for Bitcoin, I remain generally positive about the mid-term BTC performance. While iShares Bitcoin Trust ETF ( IBIT ) can't boast with lowest fees among peers, it is one of the most liquid spot ETFs, which may be a more important factor for active investors and traders. Considering the historical performance of the BTC before and after the halving event, I assign a "Buy" rating for the IBIT ETF. IBIT ETF Overview As a spot BTC-ETF, iShares Bitcoin Trust ETF allows investors to access Bitcoin within traditional brokerage accounts, eliminating the complexities associated with direct holding of Bitcoin, such as setting up accounts with crypto exchanges, high trading costs, and tax reporting challenges. Due to a way lower expense ratio of 0.12% the IBIT, as well as other newly-incepted spot BTC ETFs, is set to replace Grayscale Bitcoin Trust ( GBTC ), which still dominates in terms of AUM though also has a relatively high expense ratio of 1.50%. Seeking Alpha It should be noted that the majority of spot BTC ETFs completely or partially waive their fees for 6-12 months since the inception or until reaching a defined AUM threshold. In the case of the IBIT ETF, the fund charges a fee of 0.25% on assets over $5 billion and 0.12% for the first $5 billion of the fund's assets. According to the fund's prospectus , the fund's fee is accrued daily at an annualized rate equal to 0.25% of the net asset value of the ETF and is payable at least quarterly in U.S. dollars. As an alternative, investors may take a look at the ProShares Bitcoin Strategy ETF ( BITO ), which offers a unique way for sophisticated investors to gain exposure to Bitcoin. Unlike other Bitcoin ETFs, the BITO ETF utilizes derivatives, providing advanced traders with tools not available through other Bitcoin ETFs. This makes BITO particularly well-suited for those looking to implement more complex trading strategies around Bitcoin. Overall, if you're looking for the simplest and most liquid way to invest in Bitcoin within the "traditional" financial infrastructure, then the IBIT ETF is your way to go. Double-Digit Pullbacks Are Normal For Crypto In recent days, the crypto market has cooled off after a powerful bullish run. As of the time of writing, the BTC price is more than 13% off all-time highs: Yahoo Data, Apple Stocks app The recent correction in Bitcoin was well-anticipated given the stretched positive sentiment after a period of continuous growth. The market sentiment in crypto is still close to 2021 highs, thus I'd say there's still plenty of room for a deeper correction. Alternative.me It's worth noting that the average magnitude of corrections during BTC bull markets was around 20-30%. As you can see from the chart below, an average pullback during the 2016-2017 bull market in Bitcoin was -32%, and in the most recent bull run an average correction amounts to "just" -21%. Twitter/X, @CryptoJelleNL Therefore, if you invest in BTC, it's better to get used to the rapid swings of the crypto market to avoid spontaneous, emotion-driven selling. As for the short-term risks, considering that the recent inflation data leaves no room for the dovishness of the Fed, there's a risk of a deeper decline in the crypto market after the upcoming Fed meeting due on March 20, 2024. A potentially more hawkish stance of the Fed would mean that the Federal Reserve will keep interest rates at the current level for longer, which may weigh down on risk assets like stocks and cryptocurrencies. Another risk to be aware of is active debt-funded purchasing of the BTC performed by MicroStrategy ( MSTR ) and a rising amount of leverage in the crypto market in general. JPMorgan analysts note that MicroStrategy has already bought over $1 billion of BTC this year, and plans to buy even more. Active use of leverage essentially means that if the BTC price drops, a subsequent deleveraging of the market may exacerbate a potential drawdown in the crypto market. Therefore, volatility in crypto will likely only increase in the future. BTC Halving Is Approaching A key factor to consider Bitcoin nowadays is the upcoming halving cycle. The bitcoin halving mechanism is put in place to manage the influx of new bitcoin into the market. Operating on a decentralized network, Bitcoin transactions go through a process of verification and then are recorded on the blockchain ledger, thanks to the work of miners. Bitcoin miners receive BTC as a reward for their computational work, thus introducing more bitcoins into the system. A halving event happens roughly every four years and cuts rewards to BTC miners' by half every time. CoinDesk This reduction in the creation rate of new BTC not only generates scarcity but also caps the maximum number of bitcoins that will be available in the future. The next halving is expected to happen on April 20, 2024. Historically, Bitcoin's price continued to rise for 12-16 months following each halving event. ProShares Looking at past cycles, it took for BTC: 367 days to peak after the 2012 halving; 526 days to peak after the 2016 halving; 547 days to peak after the 2020 halving; Based on this historical pattern, in the medium term, the Bitcoin price still appears to be a significant distance from the peak during the current crypto bull market. If the historical 12-16 month post-halving growth cycle continues to hold true, there could still be substantial upside ahead for Bitcoin. For sure, investors should keep in mind that past performance is no guarantee of future results as the cryptocurrency market is highly volatile and unpredictable. The Bottom Line That said, for investors who are fully aware of risks and have a bullish long-term view of Bitcoin, the iShares Bitcoin Trust ETF presents a simple yet useful investment vehicle to invest in the BTC. Those who invest in Bitcoin specifically because of the upcoming halving should remember that every post-halving rally took around a year to fully unveil. Therefore, patience is important not only when investing in stocks, but also in the crypto space as well.
