Shortly before the US Securities and Exchange Commission approved spot bitcoin exchange-traded funds (ETFs) on Wednesday night, it reissued a "no FOMO" warning to investors.

The warning not to invest over “fear of missing out” emphasized the volatility of digital assets, noting how trendy cryptocurrency investments go through extreme highs and lows, representing billions of dollars in gains — and losses.

Even after Wednesday’s announcement, SEC chair Gary Gensler said in a statement that despite the approval of the ETF listing, "we did not approve or endorse bitcoin."

The SEC’s blessing brings industry standardization and regulation to digital asset investing. But financial experts urge caution, warning mainstream investors to tread carefully as bitcoin (BTC-USD) is still considered a speculative asset.

"From a very conservative financial perspective, you have to be very careful," Kiran Garimella, assistant professor at the University of South Florida Muma College of Business, told Yahoo Finance. "If the financial instrument that's being traded doesn't actually represent anything of specific value underlying it, then you'd have to sit back and question that."

But first, what exactly is a spot bitcoin ETF?

Spot bitcoin ETFs are investment vehicles that track the performance of bitcoin. Investors purchase shares of the fund, which is managed by asset managers who hold the actual bitcoin and its immediate value (“spot”) as the underlying asset. Those managers make money on management fees and on the slim margin between the actual price of bitcoins (which fluctuates) and the price at which they sell the shares.

While the value of the ETFs will move in tandem with bitcoin, the funds may be more stable as fund managers can utilize different financial instruments within the fund to soften the volatility.

“An ETF not only makes it much easier to buy and sell and trade these bitcoins, it could also cover some of the strategic risk for you,” Garimella said.

The world’s first bitcoin originated in 2008 and is credited to a still-unknown person who used the pseudonym Satoshi Nakamoto. It was formed based on a free market, decentralized ideology where digital currencies are created, distributed, traded, and stored in a peer-to-peer ledger known as the blockchain.

Bitcoin's price has recently hovered around $46,500, surging to $49,000 at one point last week as reactions to the SEC approval played out. The value of a coin peaked at an all-time high in 2021 when the price surpassed $65,000. But it crashed to around $16,000 just 12 months later, as investors slowly lost confidence in the sector.

Should bitcoin ETFs be part of your portfolio?

The highly anticipated SEC approval means that everyday investors can now own bitcoin in their investment or retirement accounts without having to buy digital tokens directly from a crypto exchange.

The crypto world is still opaque and out of reach to many Americans, but the 11 new spot funds are listed across the NYSE, CBOE, and Nasdaq — the same platforms where stocks, ETFs, and other traditional securities are bought and sold.

Garimella said the new funds dramatically reduce the administrative risks of investing in bitcoin. Before, interested investors had to open up a "wallet" and use "private keys" just to own the tokens. Crypto exchanges themselves also carried risks, including hacking and fraud.

"Oh, boy, you'd have to go through hoops just to acquire a fraction of a bitcoin or any other cryptocurrency for that matter," Garimella said. "Most people had no clue what a wallet or private key is."

Even now, only the funds are standardized; a strategic risk is still associated with investing in a bitcoin fund.

"It's great if you can pull it off by investing in it at $5, sell it for $500, and make a lot of money,” Garimella said. "But can you be consistent and systematic, and can you come up with a strategy to capitalize on the value generated by that?"

Broad skepticism remains about crypto in general and its speculative nature. With such instruments, there is no intrinsic value backing the digital asset, only investors’ belief that its price will go up.

"Cryptocurrency seems like speculation that central banking will be replaced — that maybe the US dollar is going to be replaced as the dominant reserve currency," Mark Higgins, CFA, CFP, and author of "Investing in US Financial History," told Yahoo Finance. "I am skeptical."

The Vanguard Group, the second-largest provider of ETFs, announced it has no plans to launch a spot bitcoin ETF or offer any crypto-related products.

"Our perspective is that these products do not align with our offer focused on asset classes such as equities, bonds, and cash, which Vanguard views as the building blocks of a well-balanced, long-term investment portfolio," the company said.

On the other side, Fidelity Investment, one of the world’s largest asset managers, launched its Fidelity Wise Origin Bitcoin Fund (FBTC) on Thursday, calling the product an efficient way for investors to gain exposure to bitcoin.

“We’ve long believed a spot-priced exchange-traded product would be an efficient way for investors to gain exposure to bitcoin,” Cynthia Lo Bessette, head of digital asset management at Fidelity, said in a statement.

Yet, in a sign of how uncharted this territory is, Fidelity is requiring investors to execute its Designated Investment Agreement (DIA) when placing an order for the FBTC fund. The DIA certifies that the investors are experienced, have high risk tolerance, and can afford to lose some or all of their investment in the digital product.

Still, these ETFs could be a safer way to own bitcoins because asset managers can reduce the funds' risk through sophisticated tactics such as opening up futures contracts, hedging, putting in call options, and improving laddering strategy.

"When you have an ETF that does all of that stuff, it introduces a certain level of stability or risk management to that underlying instrument," Garimella said. "In a crypto market, you're exposing yourself to a certain level of risk, which could be minimized with the right ETF."

The biggest appeal of bitcoin, the world’s best-known cryptocurrency, is perhaps blockchains' future potential. The technology could transform monetary transactions, its backers believe. Personally, Garimella said he owns bitcoin from an educational perspective and may put more money into an ETF because the digital coin could link to a tangible asset class in the future, given the innovation in the space.

"But would I advise my grandmother to invest in it? Probably not," Garimella said.

Where to purchase ETFs and what fees to expect

Investors interested in diversifying their portfolio with digital assets can purchase shares in spot bitcoin ETFs through their brokerage accounts. The funds will be listed similarly to other funds and can be traded throughout the day for liquidity. The approved ETFs are fund products from big financial players such as Fidelity, Invesco, and BlackRock.

Many firms have announced their fees for managing the ETFs. Blackrock (BLK), the world's largest asset manager with nearly $10 trillion in managed assets, is charging investors 0.25%, a decline from the 0.30% it previously set. Grayscale is charging 1.5%, while Franklin said it would waive management fees through August, a sign of how competitive this new market is.

Today, bitcoin remains the world's largest cryptocurrency by market capitalization — $913 billion as of Jan. 11.

Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).

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