Cryptocurrencies have made plenty of millionaires over the last decade. Bitcoin (BTC 0.69%) bulls like MicroStrategy (MSTR +4.45%) executive chairman Michael Saylor expect the largest crypto name to soar even higher in the long run, possibly creating many more millionaires along the way.
Now, buying Bitcoin isn't necessarily easy. You need an account with a cryptocurrency exchange, you must be comfortable sharing your bank information with that exchange so you can fund that account, and then you have to read up on the buying process. That used to be the only way to add direct Bitcoin exposure to your investing portfolio.
That changed in January 2024, when the Securities and Exchange Commission (SEC) allowed the launch of 11 spot Bitcoin exchange-traded funds (ETFs). Now you can buy or sell shares of these funds in pretty much the same way you'd buy and sell any ordinary stock, and their share prices are directly tied to the real-time Bitcoin price.
So it's easier than ever to start a Bitcoin investment. The largest and most popular spot Bitcoin ETF so far is the iShares Bitcoin Trust ETF (IBIT +2.24%). Can you trust this iShares trust to make you a million dollars?
CRYPTO: BTC
Key Data Points
Is Bitcoin a sensible investment?
First and foremost, the iShares Bitcoin Trust makes sense only if you expect the underlying Bitcoin crypto to make money. The Michael Saylors of the world are convinced that it will, but many investors disagree. Master investor Warren Buffett, for example, won't buy this ETF any time soon.
In 2018, Buffett predicted that Bitcoin "will come to a bad ending," along with the rest of the crypto market. Four years later, he still wouldn't have bought "all the Bitcoin in the world" for $25, because it doesn't produce anything of value.
I can't and won't argue with the greatest of all investing minds. Maybe he's right, and I certainly wouldn't recommend converting your entire nest egg into Bitcoin. But I do see enough value in this secure form of digital value storage to set up a small Bitcoin position for myself. Cryptocurrencies account for less than 1% of my overall investments, and Bitcoin isn't even the largest slice of those holdings.
So I stand somewhere in between the extreme positions of Warren Buffett and Michael Saylor. I'm willing to take a chance on Bitcoin investments, but not a very large one. That approach makes more sense to me than staying on the sidelines or going all-in. Your mileage may, as always, vary.
NASDAQ: IBIT
Key Data Points
What's special about the iShares Bitcoin Trust ETF?
Let's assume you're interested in some type of Bitcoin investment, and the iShares ETF caught your eye. Is this particular fund the best way to go?
Many investors certainly think so, and they are voting with their wallets. The fund has $22.7 billion of assets under management, breaking records in the ETF space by passing the $10 billion mark faster than any other ETF.
The second-largest spot Bitcoin ETF is the Grayscale Bitcoin Trust ETF (GBTC +2.18%) at $14.4 billion, but that fund had a head start with a peak asset value of $29 billion before the new crypto funds came along. Next up is the Fidelity Wise Origin Bitcoin ETF (FBTC +2.21%) with $11.4 billion of digital assets.
In this trio of leading ETFs, the iShares option still sees faster inflows of new funds than the other two. In other words, the iShares advantage goes beyond an early launch lead and is stretching its lead over time.
And why not? The iShares fund family comes with the financial assurance of being managed by investment services giant BlackRock (BLK +0.00%). Its annual fee ratio still enjoys an introductory rebate but will be comparable to its peers when that advantage expires.
As long as you're comfortable with essentially owning some Bitcoin (wrapped in an exchange-traded fund), you can't really go wrong with this iShares fund.
Can the iShares Bitcoin Trust ETF make you a millionaire?
Alright, but will this fund make you a millionaire? As with any investment, that depends on several factors. How large will your starting position be? It's easier to make a million from investments if you start with a larger cash investment. How long are you willing to wait? Assuming that Bitcoin prices will go up over time, it won't turn $1,000 into a million overnight. Will you add more money along the way, or simply let a single iShares Bitcoin Trust ETF investment sit untouched for many years? Spoiler alert -- your returns will increase if you keep investing in a growing asset.
Here's a quick thought experiment. I'll assume that Bitcoin's price delivers a compound average growth rate (CAGR) of 15% in the long run. The real chart won't be anywhere near this smooth growth hypothesis, but it's good enough for some back-of-the-napkin calculations.
- Put $1,000 into the fund and never touch it again. You'll get there, but not quickly. In this case, a total investment of $1,000 would reach $1,000,000 shortly after the investment's 46th anniversary.
- How about a larger original investment? A $10,000 iShares ETF bet would grow past a million dollars in 31 years.
- Alright, let's try adding some funds along the way. Imagine starting with $10,000, then automatically adding $200 per month to your ETF investment. Here, you'll reach that coveted millionaire status in 25 years, having invested a total of $70,000 by then.
Of course, the timelines will change if Bitcoin outperforms or underperforms the chosen CAGR. An average return of 20% per year would shorten the most aggressive approach to 20 years with $58,000 of invested funds. And if Warren Buffett is right, you'll never see a million-dollar Bitcoin return.
So it can be done. The iShares Bitcoin Trust ETF -- or any other investment in Bitcoin or anything else -- might indeed make you a millionaire someday. But the process will require time, patience, and a pretty serious investment.
