Mike Sakuraba graduated with double major of English and Economics. Part time writer, part time investor, full time dad. Mike loves writing about technology, sports, and investing.

2024-03-30 11:30

Coinbase vs. iShares Bitcoin Trust (IBIT): Better Proxy for Bitcoin
Unless you’ve been living under a rock for the past six months, you’ve noticed that the crypto industry has been rallying. In the words of crypto enthusiasts: we are so back. But for those who don’t have a high-risk tolerance, is there a way to invest in cryptos without actually buying cryptos? Of course! There are plenty of crypto-related businesses that trade on the stock market.

Earlier this year, we saw the spot Bitcoin ETFs finally approved by the SEC. You can think of these in the same way as gold or silver ETFs. The institutions need to buy the underlying asset to secure the value of the fund. This has caused a major supply shock to Bitcoin and has been a major reason the asset is trading at all-time highs. So this must be the best way to get exposure to Bitcoin right? Well, not so fast. In this article, we’ll compare the iShares Bitcoin Trust to Coinbase to see which is the best proxy for Bitcoin on the stock market.

iShares Bitcoin Trust (NASDAQ: IBIT)
This is a brand-new ETF but it has already set records for some of the fastest in-flows in history. While the iShares Gold Trust (NYSEARCA: IAU) was previously the fastest ETF to see $10 billion in inflows, the Bitcoin Trust shattered that record in just seven weeks. The uptake in the spot Bitcoin ETFs has been incredible. As of this week, Blackrock has accumulated more than 250,000 BTC which is currently worth nearly $18 billion.

As a pure way to gain exposure to Bitcoin, it doesn’t get much simpler and more direct than owning IBIT or any other spot Bitcoin ETF. With this fund you get real, legitimate exposure to spot Bitcoin in any registered or non-registered account. You can even hold this in a Roth IRA and never pay any taxes on your capital gains. Even if Bitcoin goes to $1 million, you’ll never pay a cent on your spot Bitcoin ETF holdings. For those with a lower risk tolerance who just want some exposure to Bitcoin in their brokerage accounts, IBIT is a perfect solution.

Coinbase (NASDAQ: COIN)
Why not invest in Coinbase for exposure to the crypto industry? Coinbase has emerged from the dust of the collapse of FTX as the leading crypto exchange in the United States. The company is also aggressively expanding operations into several new markets around the world. Remember those spot Bitcoin ETFs? Well, Coinbase is the custodian of all that Bitcoin and charges some pretty juicy fees for holding it safely.

Coinbase is going to provide you with much higher returns than IBIT. But there is the potential for losses as well. It’s not a pure Bitcoin proxy but it is likely the best way to gain exposure to the broader crypto industry. Coinbase collects billions in trading fees and with the next crypto bull market on the horizon, this revenue stream is going to grow exponentially. It certainly comes with its fair share of risk, but for those with a higher risk tolerance, Coinbase will likely outperform spot Bitcoin ETFs on most time horizons.