Where Will ARK 21Shares Bitcoin ETF Be in 5 Years?

Key Points

• The ARK 21Shares Bitcoin ETF closely tracks the price of Bitcoin, but it's simpler to manage than direct crypto ownership.

• Expert predictions for bitcoin’s future range from explosive growth to utter skepticism.

• None of the differences among top spot bitcoin ETFs are deal-breakers; small details may matter for your portfolio, though.

• 10 stocks we like better than Ark 21Shares Bitcoin ETF ›

The ARK 21Shares Bitcoin ETF (NYSEMKT: ARKB) is almost the same thing as owning Bitcoin (CRYPTO: BTC) directly. The exchange-traded fund (ETF) is a bit simpler to manage, since most stock-trading services can handle these funds. Crypto-trading functions are less common among traditional investing platforms.

So the ARK 21Shares Bitcoin ETF will largely follow Bitcoin, wherever the oldest and largest cryptocurrency is going. But there are a couple of quirks in the ETF-based ownership, especially with a relatively small ETF like the ARK 21Shares option.

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Bitcoin predictions are all over the map

First of all, many financial experts expect Bitcoin to move much higher by the year 2030.

This faction is led by Strategy (NASDAQ: MSTR) chairman and co-founder Michael Saylor, who expects the coin to "appreciate faster than any other asset" in the long run. His company still develops enterprise software, but largely sees itself as a Bitcoin bank these days, taking on debt and selling shares for the sole purpose of buying more cryptocurrency.

Fellow crypto bull Cathie Wood's ARK Invest also sees big gains ahead. Wood's research team recently raised their 2030 Bitcoin price target from $1.5 million to $2.4 million. Her company manages the ARK 21Shares Bitcoin ETF.

There are also many economy experts who don't expect much of a Bitcoin boom. Investing legend Warren Buffett wouldn't buy all the Bitcoin in the world for $25, since the coin doesn't represent any actual products or services, for example. In this view, Bitcoin looks like a temporary fad without long-term value -- just another way to move money from one owner to another, with no actual value created along the way.

Then again, Buffett was never a big fan of investing in gold -- for similar reasons. If you see investable qualities in the idea of storing value for the long term, then you might be a Bitcoin or gold investor. Personally, I think it's time for an all-digital currency to replace the dollar (and other old-school currencies) in many ways. Bitcoin must upgrade its encryption technology in order to stay ahead of the quantum computing threat, but otherwise, it looks ready to take on this role.

Why you might prefer an ETF over "real" Bitcoin holdings

Since you're still reading, you might want to give Bitcoin a shot after all. In that case, why buy a spot-price Bitcoin ETF instead of the real thing? There are many reasons. Let me highlight a few of the more popular arguments in favor of a Bitcoin ETF:

• The ETF is easier to handle in most cases. Trading an ETF is very similar to buying and selling ordinary stocks. You don't have to open a new account with a crypto-trading service, and even your retirement savings account could add crypto exposure with a simple ETF.
• ETFs can do some nice accounting tricks that generally aren't available to crypto investors yet. For example, you can easily use a Bitcoin ETF for tax-loss harvesting when prices are down. I'd talk to a qualified accountant before trying anything like that in the crypto world.
• Managing a crypto portfolio can quickly become a technical exercise. Should you rely on a central crypto-portfolio manager like Coinbase (NASDAQ: COIN) or Robinhood (NASDAQ: HOOD), or take direct ownership in a digital wallet with security keys? What happens if you lose those keys, or your chosen crypto exchange is hacked? The ETF route avoids most of these thorny technical issues.

How ARK 21Shares stacks up against a more popular option

Finally, there are nearly a dozen spot Bitcoin ETFs on the market today. What makes the ARK 21Shares fund stand out among this robust competition, led by the gigantic iShares Bitcoin Trust (NASDAQ: IBIT)?

You can't really go wrong with the leading iShares ETF, which offers unmatched liquidity and a familiar brand name. However, the ARK 21Shares fund comes with a couple of unique details:

• Thanks to a different structure of shares issued per Bitcoin under management, the ARK 21Shares ETF trades at a lower share price. This gives investors more granular control over the amount of money they're putting into their Bitcoin ETF position. Each iShares ETF share represents roughly 0.000575 Bitcoins at the moment, and a share of the ARK 21Shares fund accounts for 0.000332 Bitcoins. If those fractions are hard to follow, you can think of them as 57,500 and 33,200 Satoshis (CRYPTO: SATS) instead. 100 million Satoshis equal one Bitcoin.
• iShares is a pretty faceless entity, controlled by financial services giant Blackrock (NYSE: BLK). The ARK Invest fund family is associated with famous growth investor Cathie Wood, who often explains her Bitcoin thinking in TV interviews and blog posts.
• The fees are slightly different, too. The iShares ETF's annual expense ratio is set to 0.25%, while the ARK 21Shares option carries a lower fee of 0.21%.

Again, none of these differences are absolute game-changers or deal-breakers. Still, they are qualities you might consider before taking the plunge into the ETF-based Bitcoin waters.

All things considered, the ARK 21Shares Bitcoin ETF will follow Bitcoin's price trends very faithfully over the next five years. The period includes another halving of Bitcoin mining rewards in 2028, and the quantum computing threat is many years away from becoming a real concern.

In other words, I think this ETF will gain value over the next half-decade (but Warren Buffett is still not convinced).

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Anders Bylund has positions in Bitcoin and iShares Bitcoin Trust. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.