Investing in Digital Asset ETFs: A Safer Approach to Crypto Investment

Digital assets and cryptocurrencies have been all the rage lately. Despite a rocky start in 2024, the total crypto market is now valued at a whopping $3.59 trillion. The world of digital assets is ever-changing, and there are some key updates that investors should keep an eye on.

So, what can we expect in 2025? With Donald Trump snagging another term, digital asset prices have been on the rise. Many folks believe that the new Trump administration will be more crypto-friendly, potentially paving the way for smoother sailing ahead for digital assets. SEC Chairman Gary Gensler, who hasn’t been the biggest fan of digital assets, is stepping down. His replacement, Paul Atkins, is expected to be friendlier towards crypto, which might mean less regulatory heat on digital assets.

This shift in the regulatory environment could explain the recent surge in digital asset prices. Bitcoin, for example, recently hit a milestone of over $100,000 in December. And it’s not just bitcoin – many other top digital assets are also seeing some major gains.

If you’ve been itching to dip your toes into the world of digital assets without all the risks of direct ownership, you might be interested in the new bitcoin exchange-traded funds (ETFs). These ETFs track the price of bitcoin more closely while offering lower costs and the convenience of intraday trading, just like trading stocks. The iShares Bitcoin Trust ETF, with $21.1 billion in assets, is currently the largest player in this space.

Ethereum fans, fear not! Ethereum ETFs have also been given the green light by the SEC, with the Grayscale Ethereum Trust leading the pack with $972 million in assets. Ethereum is a big player in the digital asset world, known for its smart contract capabilities. Bitcoin and ethereum are the big names in the game, but there are ETFs available that include other digital assets like Solana, XRP (Ripple), and Cardano.

However, be warned that these lesser-known cryptos can be more volatile and less liquid. Pricing can be unpredictable, and regulatory risks are higher. If you’re not up for the rollercoaster ride, you might want to stick with the more established digital assets.

Investors looking to get savvy with tax-loss harvesting might still prefer owning digital assets directly. Unlike traditional securities, digital assets are not subject to wash-sale restrictions, so you can sell to harvest tax losses and buy back immediately. But owning digital assets directly comes with its own set of risks, like hacking and wallet management. For a more straightforward approach, digital asset ETFs might be the way to go.

While the allure of high returns may be tempting, it’s crucial to remember the risks involved. Bitcoin, for example, has seen dramatic price swings, so it’s important to invest wisely and never put in more than you can afford to lose. Digital assets can be a part of a diversified portfolio, but it’s not a one-size-fits-all solution. If you’re considering stepping into the digital asset world, chat with a financial adviser to map out the best strategy for your investments.