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The Best Bitcoin ETFs of March 2024
| ETF (ticker) | AUM |
|---|---|
Grayscale Bitcoin Trust (GBTC) | $20.7 billion |
iShares Bitcoin Trust ETF (IBIT) | $2.7 billion |
Invesco Galaxy Bitcoin ETF (BTCO) | $300 million |
Bitwise Bitcoin ETF (BITB) | $623 million |
ProShares Bitcoin Strategy ETF (BITO) | $1.8 billion |
Volatility Shares 2x Bitcoin ETF (BITX) | $222 million |
ProShares Short Bitcoin ETF (BITI) | $77 million |
Grayscale Bitcoin Trust (GBTC)
$20.7 billion
1.50%
Spot bitcoin
Why We Picked It
After years of anticipation, the Securities and Exchange Commission finally opened the door to spot Bitcoin ETFs in 2024. Only 11 ETFs received that initial permission. So far, the other 10 are dwarfed by Grayscale Bitcoin Trust. That fund, GBTC, debuted in 2013 as a trust, and is now an ETF. It remains well over 10 times bigger than the largest of the newcomer spot bitcoin ETFs.
GBTC built its infrastructure well in advance of the recent SEC ruling as it bet big in anticipation of getting over this final regulatory hurdle. Although large and liquid, however, the elevated fee structure for this bitcoin ETF at present may give some investors cause to shop around.
Still, as the largest fund that invests 100% of its assets directly in bitcoin digital currency, it remains among the leading options for investors who don’t want to manage a wallet themselves. A wallet is a device you use to store your cryptocurrency keys and access your crypto coins.
GBTC Chartby TradingView
Invesco Galaxy Bitcoin ETF (BTCO)
Assets under managemen
$300 million
Expense ratio
0.00%
Investing strategy
Spot bitcoin
$300 million
0.00%
Spot bitcoin
Why We Picked It
Invesco Galaxy Bitcoin ETF, another spot bitcoin fund, is in our list because of its generous approach to winning new business. BTCO is waiving its official 0.25% fee to zero for the first six months on the first $5 billion in assets. After July 11, the waiver expires unless renewed.
The 0.25% fee will be a bit higher than some of its competitors’, but the discount is hard to pass up for many short-term swing traders who don’t think about their bitcoin positions in a long-term way.
With a few hundred million in assets, BTCO is gathering support that could cement it as one of the few 100% bitcoin funds that might have staying power. That presumes that investors who recently piled in because of the fee waiver don’t bolt if the waiver expires this summer.
BTCO Chartby TradingView
Bitwise Bitcoin ETF (BITB)
Assets under management
$623 million
Expense ratio
0.00%
Investing strategy
Spot bitcoin
$623 million
0.00%
Spot bitcoin
Why We Picked It
Bitwise is one of the lesser-known sponsors on this list, but its Bitwise Bitcoin ETF has some features that make it noteworthy.
For starters, it’s listed on the New York Stock Exchange’s NYSE Arca platform, which means it is trading on a premier platform for exchange-traded funds.
BITB also boasts a hefty level of assets under management thanks to a short-term fee waiver that makes it free to trade for the first six months or until the fund hits $1 billion in AUM. BITB is already more than halfway there, so the discount may not last long. But even the baseline, post-waiver fee of 0.20% is attractive, so many investors may leave cash in after BITB restores that official fee.
BITB Chartby TradingView
Methodology
With the recent SEC approval of 11 spot bitcoin ETFs, the bitcoin ETF marketplace has become more crowded. However, history shows that many ETFs ultimately change to a different strategy or de-list altogether.
All of the funds included in this list are pure-play bitcoin portfolios, offering direct exposure to bitcoin through either spot prices or bitcoin futures. None of the funds included offer indirect exposure to bitcoin by owning stocks of other blockchain-related companies, such as crypto exchanges, bitcoin mining companies and banks that provide solutions for crypto companies.
As such, for our spot bitcoin ETFs we have demanded that:
- Funds possess a minimum of $200 million in assets under management, or AUM.
- Funds trade a minimum of $300,000 in shares daily.
Beyond the four spot bitcoin funds that our strategy yielded us, we also reviewed alternative bitcoin funds. For these funds to be included, we have demanded that:
- Funds maintain a minimum of $200 million in AUM.
- Funds trade 100,000 shares daily.
The only exception we made to these criteria was with the “short” bitcoin fund. It has struggled to hold shareholders’ interest amid the current bull market, but it is positioned to return to favor if bitcoin enters a bear market in the future.
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What Is a Bitcoin ETF?
A bitcoin ETF is an exchange-traded fund that invests primarily in assets related to the original cryptocurrency, bitcoin. ETFs sell shares to investors on the open market and use the proceeds to build a portfolio of assets.
ETFs are similar to mutual funds. But unlike mutual funds, ETFs are traded directly on a stock exchangelike stock in a publicly traded company.
Until January 11, due to SEC regulations, bitcoin ETFs could not trade bitcoin at its current, or spot price. Rather, fund managers had to own companies and other ETFs that were related to bitcoin or cryptocurrency in general or they owned bitcoin futures contracts. Futures are complex derivatives instruments that should only be traded by experienced investors.
Even though “spot” bitcoin ETFs now provide more direct exposure to bitcoin, different investors are interested in different strategies. Those may involve futures or other ways to gain exposure to bitcoin markets. You must do research before buying a bitcoin ETF, so you fully understand how it is structured.
What Are Spot Bitcoin ETFs?
In January, the SEC formally approved exchange-traded funds linked directly to bitcoin. So-called “spot” bitcoin ETFs can hold the digital asset without equivocation or complications.
While there have been some funds that have provided indirect exposure over the last few years, the new funds give investors a way to tie their money very closely to the day-to-day movement of bitcoin prices on “spot” markets.
But not all of the new funds will draw in enough shareholder money. That can be fatal for a fund. After all, a fund that charges 0.30% in annual expenses and has only $50 million in total assets would only generate $150,000 a year in management fees. That’s not a lot for a marketing budget, regulatory compliance work or other necessary expenses.
Grayscale Bitcoin Trust
If the SEC just recently gave approval to funds to operate as spot bitcoin ETFs, how is it that Grayscale Bitcoin Trust has been up and running since 2013? In its early days, GBTC was not an ETF.
As a trust, GBTC traded something like a closed-end fund. That meant it lacked the highly liquid, smooth redemption mechanism that ETFs enjoy. And as a result, shares often traded at a big premium or discount to the actual value of the underlying bitcoin. Investors are understandably reluctant to pay, say, $1 for 90 cents worth of assets. With SEC approval of its conversion to an ETF, GBTC got a level playing field with the other 10 ETFs that won the SEC’s okay to operate.
Alternative Bitcoin ETFs
Spot bitcoin ETFs have been making headlines lately. But ETFs that invest indirectly in bitcoin—such as ETFs that hold bitcoin futures—are not inferior. They are simply alternative strategies, looking to gain exposure to bitcoin in a different way.
One trend to watch for is that the new spot offerings have caused many shareholders to move some assets out of the older funds, into their newer cousins. Funds that fail to maintain a sufficient amount of assets under management will find it hard to stay in business.
Bitcoin ETF Fees
Owning a bitcoin ETF may, in some cases, be more expensive than simply purchasing bitcoin on a crypto exchange. Here’s why: Cryptocurrency exchanges typically charge one-time fees to buy and sell bitcoin, while owning a bitcoin ETF incurs an annual expense ratio fee. But several ETFs have temporarily waived those fees.
You should also consider if you’ll ever transfer any bitcoin from your exchange to a separate hot or cold crypto wallet. If so, you’ll likely be hit with small withdrawal fees.
And consider your exit strategy. That means paying a trading fee when you sell.
Why Should I Buy a Bitcoin ETF Instead of Bitcoin?
Some investors may feel safer getting exposure to bitcoin in their portfolios by purchasing a professionally managed ETF than they do owning actual BTC.
Widespread adoption of bitcoin as an investment is relatively recent, and some people may be concerned about hacking or losing passwords or private keys needed to access their investment when it’s stored in a secure bitcoin wallet.
While almost anyone can open a Coinbase account, not everyone is comfortable doing so. Others may be restricted to buying and selling securities in their traditional brokerage accounts for various reasons.
Many people choose to invest for retirement in an individual retirement account, otherwise known as an IRA, or in a 401(k) plan. If a retirement investor would like to get a modest amount of exposure to bitcoin without opening an account at a crypto exchange or a bitcoin IRA, owning shares of a bitcoin ETF is a reasonable alternative.
How To Invest in Bitcoin ETFs
The first step in purchasing a bitcoin ETF is to open a brokerage account. There are many options for online brokers these days.
Once an investor has opened their account, they can purchase bitcoin ETFs the same way they would purchase any other stock or ETF. In most cases, the investor simply searches for the ticker symbol in their brokerage interface, enters the amount of shares they want to purchase and clicks “buy.”
ETFs charge an annual expense ratio, which will be deducted from the investor’s account.
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The Future of Bitcoin ETFs
Nobody knows what the future of bitcoin ETFs, which are volatile securities, will be. Since inception, bitcoin prices have soared to more than $60,000 per coin. After that, they’ve dropped below $19,000.
Whether cryptocurrencies, and bitcoin in particular, will make good long-term investments, each individual investor can only decide for themselves. You should consider consulting a financial advisor before making investment decisions.
Frequently Asked Questions (FAQs)
Are bitcoin ETFs a good investment?
Every investment comes with its own risks. However, cryptocurrencies such as bitcoin are a very volatile investment class. No investor should ever risk more than they can afford to lose.
What is the best bitcoin ETF?
We’ve included a list of spot bitcoin and bitcoin futures ETFs. Every investor is in a unique position with their own unique investment goals and needs. The best bitcoin ETF for each investor can only be determined through research geared to your unique needs and circ*mstances.
What to look for in a bitcoin ETF?
As with any ETF, investors may want to look at individual investment strategies and holdings as well as metrics such as expense ratio, total assets under management and past performance to determine any ETFs they choose to invest in. As always, keep in mind that past performance is no guarantee of future results.
Are bitcoin ETFs safe to use?
Every investment comes with risks, and cryptocurrencies such as bitcoin have proven to be extremely volatile. No investor should risk more than they can afford to lose. It’s always a good idea to check with a financial advisor before making any investment decision.
The author(s) held no positions in the securities discussed in the post at the original time of publication.
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