Even with Bitcoin (BTC 1.15%) reaching new heights above $100,000, the allure and hesitation surrounding cryptocurrency remain. The crypto market's volatility is well-known, with Bitcoin's price fluctuating wildly on a daily basis. However, for those willing to embrace this inherent volatility, the iShares Bitcoin Trust (IBIT 1.74%) presents an intriguing option for their portfolios. In a short span, it has emerged as the preferred way for investors to gain exposure to Bitcoin and now ranks among the top 1% of all exchange-traded funds in terms of assets under management.

Unveiling the iShares Bitcoin Trust

The iShares Bitcoin Trust is one of the nearly dozen spot Bitcoin ETFs launched at the start of the year. As part of the iShares family from BlackRock, it can be bought and sold just like any other iShares ETF. This fund exclusively invests in cryptocurrency, bypassing the need to invest in a basket of diversified assets. It directly accesses the spot cryptocurrency market through Bitcoin, abstracting away the complexities typically associated with crypto investing. With minimal expense, it is an ideal choice for those new to the crypto world.The significance lies in not having to worry about creating blockchain wallets, remembering cryptographic keys, or opening accounts with cryptocurrency exchanges. It simplifies the investment process and allows investors to focus on the potential of Bitcoin.

Why Bitcoin Over a Basket of Cryptocurrencies?

At present, Bitcoin accounts for a substantial 55% of the total market cap of the crypto market. This dominance makes it highly efficient to gain exposure to Bitcoin rather than trying to diversify into a broader basket of cryptocurrencies. While there are thousands of different cryptos, Bitcoin's significant market share makes it the key player.Moreover, Bitcoin is one of the only two cryptocurrencies (the other being Ethereum) that ETFs can directly purchase in the spot market. For ETFs aiming to track other cryptos, they often need to use financial derivatives, introducing tracking errors and higher costs. This situation may change as crypto becomes more mainstream, but for now, Bitcoin remains the go-to asset.

Tracking Bitcoin's Performance

Bitcoin has been a top-performing asset over the past decade, despite its volatility. From 2011 to 2021, it delivered annualized returns of 230% to investors, far outperforming other asset classes like tech stocks. To capture this performance, an investment product needs to closely track Bitcoin's price.As shown in the Bitcoin/U.S. dollar chart by TradingView, the iShares Bitcoin Trust does an excellent job of tracking Bitcoin's price movements. The blue line represents Bitcoin's price, while the red line shows the ETF's share-price changes. While there is a certain degree of tracking error, the Trust has been remarkably accurate in reflecting Bitcoin's performance.

Is the iShares Bitcoin Trust Right for You?

From a perspective, the iShares Bitcoin Trust stands out for its low cost, efficiency, and transparency. It is as easy to buy and sell as other ETFs and provides 1:1 exposure to Bitcoin's long-run price performance. As long as Bitcoin's price continues to rise, it is an excellent choice for first-time crypto investors. It offers a straightforward way to participate in the crypto market without the added complexity and risks associated with direct crypto trading.