Bitcoin ETFs provide a way to invest in the largest cryptocurrency in the world without a crypto account or using a crypto exchange, and the ETFs can be purchased through tax-advantaged accounts such as Tax Free Savings Accounts (TFSA) or Registered Retirement Savings Plan (RRSP). This allows you to either not pay taxes on your Bitcoin profits (TSFA) or defer the taxes you pay on any gains until you start withdrawing from your RRSP.
What Bitcoin Is & Its Returns and Risk
Bitcoin is the largest cryptocurrency in the world in terms of market capitalization, according to coinmarketcap. Market capitalization is the price of the coin multiplied by the number of coins in circulation.
Bitcoin, unlike many other cryptocurrencies, has a finite supply. Only 21 million Bitcoins can be created. As of December 2023, there are 19.56 million in circulation.
Bitcoin is like a currency in that it can be used to buy goods or services (assuming the provider accepts Bitcoin as payment). The Bitcoin is sent to the user’s digital address. Transactions, anywhere in the world, can typically be completed within minutes.
Bitcoin is a preferred choice of many investors for a few reasons:
- It’s the largest in terms of market cap.
- It has a limited supply. If demand stays strong and supply is limited that may help fuel prices higher over the long run.
- It is the original cryptocurrency. It launched in 2009 and has stood the test of time…so far.
But investing in Bitcoin may not be everyone. It is volatile. Very volatile. That can mean both big gains and big drops in price.
Since 2018, this chart shows the rally and drop percentages that are over 50%.
There have been six drops of at least 50% (following at least a 50% rally). That’s an average of more than one 50% drop each year.
But there are also big rallies: 18,005%, 100%, 343%, 64%, 1582%, and 140%, before another 50% or greater drop occurs. As of December 6, the latest rally is 191% following the last big decline (78%)
If you like big movement, you may also be interested in the Best Performing Stocks & ETFs.
Now that you know a little about Bitcoin, and how it can move, let’s look at some of the best Canadian Bitcoin ETFs.
Best Bitcoin ETFs in Canada in 2023
Each of these Canadian ETFs owns bitcoins. The price of the ETF, multiplied by the units of the ETF that are available, reflects the value of the bitcoin held. When you buy the ETF, you are buying fractional ownership of those bitcoins.
Since each ETF is tracking Bitcoin, most should move in a similar fashion. Yet each charges a different yearly fee, called the management fee. The management fee, plus other expenses, is called the management expense ratio (MER).
A higher management fee and MER will result in lower returns for you, the investor, because more of the returns are being taken by the ETF managers.
Therefore, the best Canadian Bitcoin ETF is the one with the lowest fees.
All the ETFs on the list use “cold storage” for holding their bitcoins. Cold storage means the bitcoins are not accessible (to hackers) online. Hot storage, or a hot wallet, is when bitcoins are held in an account online.
Here are the top Bitcoin ETFs in Canada, ticker tickers, ranked in order from best to worst based on a combination of fees and returns. Additional details are in the charts below.
- CI Galaxy Bitcoin ETF (BTCX.B.TO, BTCX.U.TO)
- Fidelity Advantage Bitcoin ETF (FBTC.TO, FBTC.U.TO)
- Purpose Bitcoin ETF(BTCC.TO, BTCC.B.TO, BTCC.U.TO)
- 3iQ Coinshares Bitcoin ETF (BTCQ.TO, BTCQ.U.TO)
- Evolve Bitcoin ETF(EBIT.TO, EBIT.U.TO)
- Purpose Bitcoin Yield ETF (BTCY.TO, BTCY.B, BTCY.U.TO)
Top Choice: CI Galaxy Bitcoin ETF
This ETF trades under two ticker symbols:
- BTCX.B.TO – priced in Canadian dollars
- BTCX.U.TO – priced in US dollars
The choice comes down to whether you want to pay for the ETF in US or Canadian dollars.
| Inception Year: | 2021 |
| Management Fee | 0.4% |
| Management Expense Ratio (MER): | 0.87% |
| 1-Year Return (BTCX.B): (December 6, 2022, to December 6, 2023) | +156% |
| Assets Under Management (BTCX.B): | $505 million |
Updated stats on the ETF can be founded on the CI Galaxy Bitcoin ETF information page.
All yearly returns were pulled from TradingView, so I could compare the exact same dates for each ETF. Other statistics are from the ETF’s website or documents.
This is the best Bitcoin ETF in Canada because it has the lowest fees. As mentioned, most of the Bitcoin ETFs are doing the same thing. They own bitcoin and the price of the ETF is based on the price of bitcoin.
It is also one of the larger Bitcoin ETFs in Canada.
I personally own quite a bit of this fund along with the CI Galaxy Ethereum ETF. I don’t rank it first because I own it, I own it because it ranks first in my books. The low management fee is likely to produce better returns over time than the higher fee funds discussed below.
2nd Choice: Fidelity Advantage Bitcoin ETF
This ETF trades under two ticker symbols:
- FBTC.TO – priced in Canadian dollars
- FBTC.U.TO – priced in US dollars
Once again, the choice between the two funds comes down to whether you want to purchase the ETF with US or Canadian dollars.
| Inception Year: | 2021 |
| Management Fee: | 0.4% |
| Management Expense Ratio (MER): | 0.95% |
| 1-Year Return (FBTC.TO): (December 6, 2022, to December 6, 2023) | +155% |
| Assets Under Management (FBTC.TO): | $185 million |
You can stay updated on the fund via the Fidelity Advantage Bitcoin information page.
This is a smaller fund than CI Galaxy Bitcoin ETF, and has had a slightly worse return over the last year due to the higher expense ratio.
Unless you really like Fidelity, there isn’t a whole lot of reason to choose this fund over CI Galaxy.
Also, ETFs that don’t have a lot of assets under management face an increased risk of shutting down. The management fee on a smaller amount of capital may not justify keeping the fund open.
3rd Choice: Purpose Bitcoin ETF
The two funds above have a management fee of 0.4%. There are additional fees that add up to create the MER. The funds below have much higher management fees.
This ETF trades under three ticker symbols:
- BTCC.TO – priced in Canadian dollars but hedged against US dollar price fluctuations (because Bitcoin is priced in US dollars)
- BTCC.B.TO – priced in Canadian dollars, unhedged
- BTCC.U.TO – priced in US dollars
| Inception Year: | 2021 |
| Management Fee: | 1% |
| Management Expense Ratio (MER): | 1.49% |
| 1-Year Return (BTCC.B.TO): (December 6, 2022, to December 6, 2023) | +154% |
| Assets Under Management (BTCC.B.TO): | $2.1 billion |
The Purpose Bitcoin ETF is the oldest Canadian bitcoin ETF, beating the other ETFs to market, but not by much. The MER is capped at 1.5% and this fund has the most assets under management.
It offers a currency-hedged version. While ETFs can be priced in USD or CAD here in Canada, the bitcoin price itself is typically quoted in US dollars. Therefore, the value of the fund is not only affected by Bitcoin’s movements but also by the USD. The hedged version of the ETF eliminates that USD variable.
If it is a little confusing, think of it this way. You could buy the USD version of the ETF, which contains bitcoin priced in US dollars. If you the sell ETF and convert those US dollars back to Canadian, your profit not only depends on what you sold the ETF for, but the exchange rate you get when converting your USD to CAD.
If you buy the ETF priced in Canadian dollars, you still own bitcoins priced in US dollars.
The hedged ETF eliminates USD currency exposure so the performance of the fund is theoretically based on bitcoin in Canadian dollars (not bitcoin in USD).
4th Choice: 3iQ Coinshares Bitcoin ETF
This ETF trades under two ticker symbols:
- BTCQ.TO – priced in Canadian dollars
- BTCQ.U.TO – priced in US dollars
| Inception Year: | 2021 |
| Management Fee: | 1% |
| Management Expense Ratio (MER): | 1.75% |
| 1-Year Return (BTCQ.TO): (December 6, 2022, to December 6, 2023) | +152% |
| Assets Under Management (BTCQ.TO): | $160 million |
The higher management fees have caught up the 3iQ Bitcoin ETF as it has underperformed the other Canadian Bitcoin ETFs with lower fees.
5th Choice: Evolve Bitcoin ETF
This ETF trades under two ticker symbols:
- EBIT.TO – priced in Canadian dollars
- EBIT.U.TO – priced in US dollars
| Inception Year: | 2021 |
| Management Fee: | 0.75% |
| Management Expense Ratio (MER): | 2.17% |
| 1-Year Return (EBIT.TO): (December 6, 2022, to December 6, 2023) | +153% |
| Assets Under Management (EBIT.TO): | $169 million |
With a higher management fee, there is not much reason to purchase this ETF over the ones above. You can find additional data on this fund on the Evolve Bitcoin page.
It is tracking Bitcoin, just like the others, and has no clear differentiating features that make it stand out.
I also didn’t like that the MER was hard to find. They post the management fee but I couldn’t find any reference to the MER. I had to look in a management report filed in mid-2022 to find any reference to MER.
Its performance is comparable to the 3rd and 4th ranked top-ranked ETFs. Despite having the highest MER.
This can happen because ETFs don’t always trade exactly at what the value of the holdings within the ETF (called the Net Asset Value or NAV).
An ETF can trade fluctuate around its NAV. For example, the value of the assets in the ETF may be $5 per share, but the price of each share could trade at $4.90 (a discount) or at $5.23 (a premium). The discount or premium will affect the percentage performance of the ETF. The premium or discount is usually temporary as the price fluctuates around NAV.
Over time, the higher management fees will likely result in the ETF underperforming its lower-fee peers. When only looking at one year of price history, fees have little effect compared to over time.
6th Choice: Purpose Bitcoin Yield ETF
This ETF trades under three ticker symbols:
- BTCY.TO – priced in Canadian dollars but hedged against US dollar price fluctuations
- BTCY.B – priced in Canadian dollars, unhedged
- BTCY.U.TO – priced in US dollars
| Inception Year: | 2021 |
| Management Fee: | 1.1% |
| Management Expense Ratio (MER): | 1.28% |
| 1-Year Return (BTCY.B.TO): (December 6, 2022, to December 6, 2023) | +90% (+112% including dividends) |
| Assets Under Management (BTCY.B.TO): | $81 million |
| Yield (BTCY.B) | 11.2% |
Bitcoin doesn’t pay dividends, it is more like a commodity that investors buy hoping the price will rise over time.
This ETF offers a yield, paying approximately 11% (this can vary significantly throughout the year). Like a dividend yield, this will vary based on the price of Bitcoin and the performance of the “covered calls”. You can check out current yields on the Purpose Bitcoin Yield ETF information page.
The yield is generated by selling covered calls on the owned bitcoins, which generates income that is then paid out to investors.
If you want income, maybe this is a viable choice. But you’ll also notice the ETF has performed far worse than the others…but you received some cash along the way.
Buying Bitcoin in Your TSFA or RRSP
The Canadian Bitcoin ETFs make it possible to own Bitcoin inside your TSFA or RRSP.
An ETF is the only way to own Bitcoin in these types of accounts.
If you are most interested in never having to pay taxes on your gains, then consider buying a Bitcoin ETF in your TSFA. Gains are not taxed, even when you withdraw funds. But don’t day trade in the TFSA; this may get you flagged by the CRA and you may need to pay taxes. Think “investing” not short-term trading.
If you want a tax break now, contribute funds to your RRSP which creates a tax deduction for this year for the amount contributed. Then use those funds, or a portion, to buy a Canadian bitcoin ETF. Your gains can accumulate in the RRSP without paying taxes until begin withdrawing funds.
Canadian Bitcoin ETFs as Part of an Overall Portfolio
Each person is different. We discussed at the beginning how volatile Bitcoin can be. The rewards are potentially big, but so are the risks. So deciding how much bitcoin (ETF) you want to own in your portfolio may require some thinking and strategy.
A portfolio is typically composed of:
- Stocks (individual or ETF)
- If you prefer more stability, you may want to consider stock index funds which have increased on average 10% per year (based on S&P 500) over the last 100 years, or Top Buy and Hold Stocks with steady growth. The Nasdaq 100 index has returned 13.2% per year over the last 20 years.
- Bonds (Individual or ETF)
and sometimes:
- Commodities or metals (usually in the form of an ETF)
- Cryptocurrencies
- and other Alternative investments
Portfolio allocation is a complex topic and can read about different portfolio compositions here.
In my long-term portfolio, most of my capital is in US and Canadian stock market index ETFs. I invest in several different ones that focus on different segments of the market. I lay out my favorite ETFs in the Passive ETF Investing eBook.
I then have some of my funds invested in international indices and some in cryptocurrency ETFs.
Each person needs to decide how much of their capital they want to invest in each.
The Risks of Bitcoin ETFs in Canada
Bitcoin is volatile. Expect to have 50% or greater drops every few years. The future is uncertain, and a drop may eventually come when Bitcoin does not recover to the highs seen before the drop.
You are paying a management fee for something you can do yourself. If you open an account with a crypto exchange you can buy Bitcoin yourself. You can then store it on the exchange (hot wallet) or transfer it to a cold wallet (bought separately) offline. The flip side of this is that you can’t own physical Bitcoin in your TSFA or RRSP, but you can own a Bitcoin ETF inside these tax-advantaged accounts.
You also can’t use your Bitcoin ETF to make purchases or payments, like you could with actual Bitcoin. That said, if you simply want to own Bitcoin for the potential long-term price appreciation, then that shouldn’t be a big deal.
There is a remote risk that the ETF could lose the Bitcoin or the hard wallets the Bitcoin is held on, or they could be hacked, or an employee could run off the loot.
Bitcoin and cryptocurrencies are also in their infancy. Laws and regulations are being updated regularly in countries around the world. Those regulations may impact the price of Bitcoin, a regulation may ban it, or render it useless versus new technology or financial systems.
By Cory Mitchell, CMT
Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.
