Do you experience FOMO, or the fear of missing out? I do, and I’m betting you do, too. It’s a risky motivator that can have you doing things you wouldn’t normally consider doing, and Wall Street is a treacherous place when it comes to FOMO.
One of the big investing trends today is cryptocurrency, which is why I’ve had my eye on the iShares Bitcoin Trust (NASDAQ: IBIT). But is this exchange-traded fund an easy way to crypto riches, or is it just too risky to bother with? I tried to clear away the FOMO and find out the answer for myself.
The investment objective of the iShares Bitcoin Trust is to “reflect generally the performance of the price of Bitcoin.” Its largest holding is, as you would expect given the exchange-traded fund’s (ETF) name, Bitcoin. There’s a little bit of cash on the ledger, too, but it isn’t material. The iShares Bitcoin Trust is an easy way for people to invest in Bitcoin without having to go through the headaches of directly owning cryptocurrencies.
If you have been thinking about jumping into crypto, this is a pretty attractive way to do it. That said, the expense ratio is a bit high for an ETF at 0.25%. But given the specialization of the product, that cost probably isn’t unreasonable. And investors have been rewarded well, with the iShares Bitcoin Trust rising roughly 85% since its inception in early 2024. That, however, is where the problem comes in for an investor like me.
The chart above looks fairly reasonable. There are ups and downs, but the trend is generally higher and to the right. However, if you switch the chart to look at the drawdowns, you can see that there are some pretty sizable performance swings going on here. The chart below highlights that fact pretty clearly.
However, the swings aren’t really the biggest problem with this graph. It is the time period. The graph covers the iShares Bitcoin Trust since it was created on Jan. 5, 2024. All that volatility occurred over a period of just 15 months or so. That’s a shocking amount of volatility, but it’s pretty much normal for the crypto market.
That is why I simply don’t have what it takes to buy the iShares Bitcoin Trust. I am a conservative, income-oriented investor. I like stocks that are boring and reliable and that reward me for sticking around with regular, and preferably growing, dividend checks. None of that is on offer from the iShares Bitcoin Trust.
While I feel the pangs of missing out on big gains, I recognize that I wouldn’t be able to sleep at night if I owned the iShares Bitcoin Trust. Buying it would go against just about every investment principle I hold dear. I’m sure there are a lot of people who have made a lot of money with this type of investment. Good for them; I wish them well, and I hope a deep drawdown doesn’t wipe out all of their gains. But the iShares Bitcoin Trust doesn’t have a place in my portfolio. It’s simply too volatile, and it doesn’t fit with my income goals.
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