Cryptocurrency investing has become all the rage in recent years. The challenges of owning cryptocurrency tokens kept many prospective investors clear of indulging themselves.
However, everything changed with the launch of the world’s first Bitcoin Exchange-Traded Fund (ETF) earlier in 2021, making it easier for Canadians to invest in the decentralized currency. No more worrying about signing up to crypto exchanges, protecting public keys, using cold wallets, or the lengthy transaction times.
Today, I will discuss one of the latest ETFs to enter the fray. My Fidelity Advantage Bitcoin ETF review (FBTC) will cover everything you need to know about the latest Bitcoin ETF in Canada to make a well-informed decision about whether the latest cryptocurrency ETF offering might be worth your investment capital.
Invest In Bitcoin
Gain relatively safer exposure to the world’s first cryptocurrency through the latest cryptocurrency ETF approved in Canada.
- Easy to trade and gain exposure to Bitcoin for newcomers
- Gain more liquid exposure to Bitcoin
- You can hold it in registered investment accounts for tax-free returns
- Eliminates the challenges of owning the cryptocurrency yourself
- Sold on regulated brokerage platforms with IIROC protection
- Does not diversify into any other asset
- Volatile and entails a high degree of capital risk
What Is Fidelity Advantage Bitcoin ETF?
Fidelity Advantage Bitcoin ETF (FBTC) is a fund that offers you an easier way to invest in Bitcoin through publicly-traded security available on the Toronto Stock Exchange.
FBTC ETF allows you to take advantage of owning Bitcoin units without having to register with a cryptocurrency exchange and go through the process of acquiring Bitcoin yourself.
Fidelity Investments Canada ULC is the Canadian arm of Fidelity Investments, a leading investment management firm. FBTC ETF is Fidelity Canada’s first spot Bitcoin ETF in the country, making it the largest investment management firm in the country to offer a Bitcoin ETF.
Fidelity Advantage Bitcoin ETF has started trading on the TSX under the ticker FBTC for the Canadian dollar-denominated version and FBTC.U for the US dollar-denominated version. Aptly named Fidelity Advantage Bitcoin ETF, FBTC ETF is supported by the strength and scale of Fidelity.
Fidelity Canada has been researching and investing in Bitcoin and the underlying blockchain technology for several years. The asset manager leverages its extensive experience, a strong understanding of the technology, its benefits and risks, and the investment potential for investors.
The asset manager received approval from Canada’s regulators to launch an institutional Bitcoin trading and custody platform, Fidelity Clearing. It is Canada’s first Investment Industry Regulatory Organization of Canada (IIROC) to offer Bitcoin trading and custodian services for institutional investors in the country.
Launched on November 30, 2021, FBTC ETF holds 101.7244 Bitcoin units as of December 3, 2021, boasting net assets worth $2.5 million as of November 30, 2021.
The fund comes with a high-risk rating due to the extreme volatility of the underlying asset. High volatility and intraday price changes are inherent to the asset class, making FBTC ETF a similarly volatile asset to own.
Here are some key facts about Fidelity Advantage Bitcoin ETF (FBTC):
- Inception Date: November 30, 2021
- Net Assets: $2.5 million (as of November 30, 2021)
- Management Fee: 0.40%
- MER: Hypothetically estimated capped at 0.95%
- Eligible Accounts: Registered and non-registered accounts
- Units per Bitcoin: 2,949.1455 (as of December 03, 2021)
- Bitcoin per unit: 0.00033908 (as of December 03, 2021)
This section of my Fidelity Advantage Bitcoin ETF review will cover what you need to know about the fund’s asset allocation. Traditionally, investment managers tend to diversify the assets held by a particular fund across several asset classes to give you exposure to a basket of securities.
Allocating the assets into a group of securities provides you with a relatively lower degree of capital risk because the stability of other assets can mitigate the losses incurred by a few.
However, FBTC ETF allocates 100% of its funds in “physical” Bitcoin. It means that Fidelity Advantage Bitcoin ETF does not invest in any other assets than Bitcoin.
Allocating a portion of your investment capital to the fund means holding the corresponding number of Bitcoin tokens that you would get with the same amount of money.
A complete allocation of funds to Bitcoin through the ETF means that your capital invested in the fund could register significant upticks and declines based on Bitcoin’s price movements.
ETFs traditionally spread your capital across several investments that could be related by industry, geography, or based on a particular stock market index. However, FBTC ETF only invests your money in Bitcoin.
The investment objective for Fidelity Advantage Bitcoin ETF defined by the fund manager is to simply “invest in Bitcoin.” When you purchase the ETF, you will own units of the fund.
The fund manager accumulates the funds from unitholders and uses them to own physical Bitcoin. The price of individual units you own will go up and down directly in relation to Bitcoin prices on any given day.
Cryptocurrencies are not yet recognized as currency by regulators and traditional brokerages. It means that investing in a Bitcoin ETF is the only viable method to own Bitcoin on the stock market.
Unlike many other Bitcoin ETFs that provide you with investment returns through Bitcoin futures contracts, FBTC ETF is physically backed by Bitcoin – not derivatives like futures contracts. It means that FBTC ETF is more akin to commodity ETFs.
Since you can trade ETFs like individual stocks on the stock market, it is far easier for you to trade your Bitcoin holdings by purchasing and selling FBTC ETF units on the stock market.
FBTC ETF is undoubtedly among the most volatile ETFs that you can find on the TSX. It is a claim I can make despite the fund’s relatively limited time trading on the stock exchange at writing due to the speculative nature of the underlying commodity the fund holds.
The fund’s price will keep changing drastically each day, much like the price of Bitcoin. As the table above shows, FBTC ETF was closed at $24.91 per unit on December 2, 2021. After a weekend bitcoin crash, it closed at $21.35 on December 6, 2021, reflecting a substantial decline of 14.29% in a matter of days.
However, a bull run for Bitcoin could easily see the FBTC ETF’s unit prices rise significantly. Be aware of the risks and know that this ETF could see some wild swings.
When you buy FBTC ETF, it can resolve many issues that you can face when buying Bitcoin from a cryptocurrency exchange yourself.
Traditionally, buying Bitcoin as an investment requires registering with a cryptocurrency exchange, setting up a digital wallet that stores your holdings, and managing the safe storage of your passwords.
Unfortunately, cryptocurrency exchanges are notorious for being slow, buggy, and there have been several instances of hackers gaining access to their credentials.
Additionally, cryptocurrency exchanges may take several days to process the deposits for investors into their accounts for trading. It means that Bitcoin investors cannot buy more Bitcoin or withdraw their holdings on time to capture profits or mitigate losses that come with drastic intraday price changes.
Buying Bitcoin through FBTC ETF alleviates many of those challenges for you. You can increase or decrease your exposure to Bitcoin during the day by trading the ETF units you hold in your account through a trading platform. No more worrying for days on end to make deposits or withdrawals.
Fidelity Advantage Bitcoin ETF also adds another element of security for your Bitcoin holdings by using cold storage.
As of December 3, 2021, the fund manager holds 98% of its Bitcoin in cold storage, making it safe from hackers in case they compromise the fund manager’s security. However, that might not be a concern for you.
FBTC ETF accesses Bitcoin through Fidelity Clearing, which leverages Fidelity’s selected trading platforms. The fund manager stores the physical Bitcoin it owns using an institutional-grade custodian model.
The solution offers vaulted cold storage, physical, cyber, and operational controls, alongside multilevel and innovative safeguards.
This model allows the ETF access to trade and holds custody of digital assets in a secure way. One of the biggest advantages that come with owning FBTC ETF is the confidence you can have in Fidelity Canada’s institutional-grade security.
If you are concerned about whether FBTC ETF is safe in terms of the capital risk it entails, you should know that you could lose your entire investment in the fund. ETFs with higher volatility tend to have returns that exhibit significant changes over time compared to low-volatility funds.
FBTC ETF allocates its entire assets to Bitcoin. Given the speculative nature of Bitcoin, you could see massive investment returns or significant losses based on how the cryptocurrency performs.
This section of my Fidelity Advantage Bitcoin ETF (FBTC) review would typically cover the performance of the fund and the management fees you can expect to incur if you hold the fund’s units in your investment account.
FBTC ETF launched only a few days ago at writing. It means that the fund’s performance results are not available right now.
In accordance with National Instrument 81-102, Fidelity Canada cannot share the performance metrics for the fund until a year after its inception. You can expect to see the performance results for the fund by November 30, 2022.
According to the fund’s website, the management fee for FBTC ETF is 0.40%, and its hypothetical estimated Management Expense Ration (MER) is capped at 0.95%. However, the fund manager has stated that it may change the MER without notice.
You can purchase the Fidelity Advantage Bitcoin ETF in Canada through most Canadian brokerage platforms that offer stock and ETF trading. My top choices and the cheapest ways to purchase FBTC ETF in Canada are Wealthsimple Trade and Questrade.
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Fidelity Advantage Bitcoin ETF (FBTC) could be an excellent option for investors seeking exposure to Bitcoin without facing the drawbacks that typically come with purchasing the cryptocurrency directly from an exchange.
Buying shares of the ETF means that you can allocate your capital to track Bitcoin prices without owning the cryptocurrency units and handling their safe storage yourself.
You can buy and sell FBTC ETF units during the day as you can with stocks, giving you more liquid exposure to the asset. It means you can capture profits without facing considerable delays traditionally associated with cryptocurrency exchanges.
The most significant advantage of investing in FBTC ETF is the ability to store the fund’s units you own in registered investment accounts like a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP).
You can enjoy the returns from your investment in the fund without worrying about incurring capital gains taxes.
One crucial thing to remember is that more convenient and liquid exposure to Bitcoin through FBTC ETF does not eliminate the capital risk inherent to cryptocurrency investing. The cryptocurrency world’s volatility can see the value of FBTC ETF units you hold dramatically fluctuate in a matter of days.
If you want to gain exposure to the world’s most popular cryptocurrency, investing in FBTC ETF could be a good approach to consider.
However, I would highly recommend that you delve into this asset class, provided that you already have a balanced investment portfolio comprising of more traditional assets available in the stock market.
Check out my list of the best Bitcoin ETFs in Canada if you want to explore other financial instruments that can provide you with exposure to the world’s first cryptocurrency.