Down 21%, Is This Sinking ETF a Buy Below $50?

While choosing individual stocks is a hobby for certain people, exchange-traded funds (ETFs) are a great choice for those who prioritize convenience and simplicity with their investments. Even better, ETFs can provide portfolio exposure to specific industries, themes, or asset classes in a low-cost, diversified manner. It’s hard to beat that combo.

There’s one increasingly popular ETF that is up 25% just in the past year (as of April 15), outperforming the stock market by a wide margin. However, it’s 21% below its all-time record, probably due to ongoing economic uncertainty that’s forcing investors to be a bit more cautious with their approach.

While it trades below $50, should investors switch their views, adopt a more aggressive mentality, and start buying this ETF? 

Coming in hot

In a seminal moment for the industry, the Securities and Exchange Commission finally approved spot Bitcoin ETFs for public trading in January 2024. Looking back over the past 15 months, these have collectively been the most successful ETF launches in history.

There’s one clear winner thus far: the iShares Bitcoin Trust (IBIT 0.71%). This ETF, which currently has $49 billion in assets under management, is sponsored by BlackRock, the gargantuan asset manager.

Investors who are bullish on Bitcoin but want a regulatory-friendly, very convenient method of gaining exposure will find the iShares Bitcoin Trust a smart choice. There’s no need to understand self-custody or figure out how to manage private keys. And investors can avoid signing up for a digital wallet or a new crypto brokerage account.

Plus, it has a relative low expense ratio of 0.25%. On a $10,000 investment, this amounts to $25 on an annual basis. That’s not egregious by any means.

Are you bullish on Bitcoin?

Of course, investors who are thinking of buying the iShares Bitcoin Trust right now, while it’s below $50, must be bullish on Bitcoin, the underlying asset. The ETF tracks the price performance of the world’s leading cryptocurrency. Your belief on whether Bitcoin is a good investment idea determines if the ETF finds its way into your portfolio.

In my opinion, Bitcoin is a solid long-term idea. One important reason why is due to its fixed supply cap; there will only be 21 million units in circulation. This limit is written in the Bitcoin code and enforced by miners and nodes. And the halving events further control the inflation rate, which is lower than gold’s.

Owning a scarce asset makes sense, particularly when you understand the monetary and fiscal system. The U.S. government currently carries an astronomical amount of debt, to the tune of $37 trillion. This number has doubled in the past decade, which should raise concerns.

There’s no reason to believe that the government will stop raising debt or printing money, unless drastic measures are taken. The writing is on the wall. However, greater liquidity in the system should benefit a risk asset like Bitcoin.

What’s more, it seems like Bitcoin is viewed in a more favorable light among regulators with each passing year. The White House recently established a Bitcoin strategic reserve, viewing the digital asset as a smart holding for the prosperity of the country.

There are virtually an unlimited number of crypto tokens out there today. As the oldest and most valuable, with a market cap of $1.7 trillion, Bitcoin stands head and shoulders above the rest. It has deep liquidity, a powerful network effect, and unmatched brand strength. These positive attributes can’t be ignored.

With the ETF trading 21% off its peak and below $50 right now, buying iShares Bitcoin Trust can be a great way to gain Bitcoin exposure for your portfolio.