The price of bitcoin is going crazy. There’s just no other way to describe it. On Friday it was knocking off $1,000 US price barriers by the hour. In one stretch of 16 hours from Friday into Saturday the price of bitcoin increased by over 12%. To put that into context, have a look at Canadian ETFs in 2020. Canadian stocks delivered less than 6% for an entire year. That’s just crazy; you can use the word ridiculous as well if you like. Let’s try and make sense of this. We’re going crypto crazy on Weekend Reads.
On Sunday morning the price of bitcoin sits above $57,000 US.
Here’s the price movement for the last 3 months. The chart is courtesy of coindesk.
Of course, those of us who are invested in bitcoin (directly by hot or cold storage wallets) or by way of funds have no problem with this price craziness. We’re happy to go along for the ride.
And this week Canadian ETF providers (and Canadian regulators) were trail blazers as we saw the trading of the first Bitcoin ETF in the world from Purpose Investments.
That was followed up later in the week with a bitcoin ETF from Evolve.
The Purpose ETF sets a day one record.
The desire for bitcoin ETFs is incredible.
North America’s first Bitcoin ETF got off to a stellar start in its first day of trading, with investors exchanging US$145 million worth of shares. This BNN Bloomberg poll shows that bitcoin available by way of an ETF will increase the desire to invest.
Investors trust ETFs.
And of course the convenience factor is huge. An investor can press that buy button and have exposure to bitcoin leaving the technical details to Purpose Investments, Evolve ETFs and their custodians that hold the bitcoin in their own cold storage. Most recent stage retail investors will want a simple fund or ETF solution. Bitcoin (while simple in premise) is intimidating when it comes to the logistics of holding in your own wallet.
The first publicly traded bitcoin exchange-traded fund (ETF) in North America has amassed $421.8 million in assets under management (AUM) in two days. There are predictions that it will top $1 trillion by the end of next week.
Investors were moving from 3iQ to ETFs.
Cut The Crap Investing readers will know that I hold the closed end fund from 3iQ. Many readers have also embraced that option. Always consider though, any mention of bitcoin is not investment advice. I have embraced bitcoin as a portfolio asset with a weighting just above 5%. It’s a personal choice and I understand how many (perhaps most) will want nothing to do with cryptocurrency.
Moving forward I will rebalance with the bitcoin holding, just as I will with any other portfolio asset. This asset just happens to be extremely volatile, and yes, crazy these days. More than the recent trading frenzy I am more interested in the long term potential of bitcoin as digital gold. Like real gold it will be a store of value and protect me/us from inflation and fiat currency debasement. I still hold gold ETFs and materials ETFs. I am shading in commodities ETFs as well.
As I put in my most recent MoneySense post – are you ready for the next commodities super cycle?
3iQ’s QBTC is selling at a discount.
Last week, many were selling their 3iQ fund holdings (there is a US dollar version available as well) and they were moving to the Purpose ETF. That created a situation where the 3iQ funds went on sale.
The 3iQ funds are not ETFs but closed end funds. They do trade on stock markets during the days and hours that the markets are open, but they are priced in response to supply and demand for units – the buy and sell orders. That means that the funds can go on sale (selling at a discount) or they can be expensive (selling at a premium). On Thursday and Friday QBTC went on sale even up to the area of a 15% off! sale.
The bitcoin ETFs will more closely track the price of the underlying bitcoin holdings. Have a read of … How are your ETFs priced and how they stay on track.
You should also pay attention to how you place your trades with ETFs. Here’s how to place buy and sell orders for your ETFs.
To see the discount or premium for the 3iQ funds you can look to this page on their site. You’ll see the NAVPU (net asset value per unit) vs the actual price per unit.
From this example we see that the NAVPU (actual value of the underlying bitcoin owned) is $78.71 per unit, but you’ll only pay $69.86. Who doesn’t like a sale? I added more QTBC on sale on Friday. If you are looking to initiate a position next week, you might pay attention to the discounts and premiums.
For a real-time comparison you can use this link.
Moving forward I will use both, the closed end funds and an ETF. If I need to add, I will first look for any discount that might be available. Ditto, if I am trimming for rebalancing, I will look for that premium.
More Weekend Reads.
We might as well start with more crytpo, on My Own Advisor Mark offers a crypto-theme, and then slides into dividends, best places to live and more .
There are many good posts on Findependence Hub this week including RRSP holdings on the rise as knowledge falls.
Mike The Dividend Guy offers how and when to sell your losers. For the record I have not sold out of a stock in several years.
I touched on out-of-favour bonds in my MoneySense weekly, and in The Sunday Newsletter here’s the everything in Canadian bond ETFs post. Great stuff as always.
And looking to the other side of the pandemic, Barry Choi (for lowestrates.ca) offers how to save money when you can road trip again.
I don’t often say yes to podcasts but I could not say no to our friends at Justwealth. The host of the podcast is the legendary financial journalist, Pat Bolland. It was a great experience.
Here is The Robo’s have landed! Have a listen and let me know how I did, ha. 🙂
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