With the approval of spot Bitcoin exchange-traded funds (ETFs), and the existence of other Bitcoin-related ETFs, choosing the right one can be challenging. To simplify your decision, we've analyzed a selection of ETFs that hold spot Bitcoin, Bitcoin futures, options on futures, or stocks of Bitcoin mining companies.
Our goal is to provide a clear list of the best Bitcoin ETFs available. Keep in mind that Bitcoin is highly volatile, and so are related financial products. Always consider how these investments align with your overall risk strategy.
Our Selection of the Best Bitcoin ETFs
| ETF Name and Ticker | ETF Description | Expense Ratio | Assets Under Management (AUM) |
|---|---|---|---|
| BlackRock iShares Bitcoin Trust (IBIT) | Spot Bitcoin ETF | 0.12% | $21.6 billion |
| Grayscale Bitcoin Trust (GBTC) | Spot Bitcoin ETF | 1.50% | $15 billion |
| Fidelity Wise Origin Bitcoin Trust (FBTC) | Spot Bitcoin ETF | 0% | $11.2 billion |
| Ark 21Shares Bitcoin ETF (ARKB) | Spot Bitcoin ETF | 0.21% | $2.8 billion |
| Bitwise Bitcoin ETP Trust (BITB) | Spot Bitcoin ETF | 0.20% | $3 billion |
| ProShares Bitcoin Strategy ETF (BITO) | Spot Bitcoin ETF | 0.95% | $1.8 billion |
*All data is sourced from VettaFi and is current as of August 6, 2024.
How We Selected the Best Bitcoin ETFs
Our investment experts used the following criteria to identify the top Bitcoin ETFs:
- ETFs must be listed on major US exchanges like the NYSE, CBOE, or Nasdaq.
- The fund must hold spot Bitcoin, Bitcoin futures, options on futures, or stocks of Bitcoin mining companies.
- Each ETF must have over $1 billion in assets under management (AUM).
The final ranking is based on the total assets under management.
What Is a Bitcoin ETF?
A Bitcoin ETF is an exchange-traded fund that holds Bitcoin, Bitcoin futures contracts, options on those futures, or shares of publicly traded Bitcoin mining companies. It offers a way to gain exposure to Bitcoin's price movements without directly owning the cryptocurrency.
In the United States, no ETF is currently permitted to hold Bitcoin directly. However, numerous financial institutions have submitted applications to launch such spot Bitcoin ETFs.
How to Invest in a Bitcoin ETF
Buying and selling Bitcoin ETF shares is similar to trading any stock on the market through an online broker. Here’s a simple step-by-step guide:
- Select a trading platform. Choose a reputable online broker that offers access to a wide range of ETFs.
- Open an account. Complete the registration process by providing your personal information.
- Fund your account. Deposit money by linking your bank account or transferring funds from another investment account.
- Search for the ETF. Use the ETF’s name or ticker symbol to find it on the platform.
- Place your order. Buy the desired number of shares to complete your investment.
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How to Choose the Best ETFs for Your Portfolio
With thousands of ETFs available, it’s important to consider several factors to find the right fit for your investment goals:
- Investment Time Frame. Determine how long you plan to invest. Some ETFs aim for high short-term growth, while others are designed for long-term stability.
- Investment Strategy. Define your goals. Are you seeking steady long-term gains or higher returns through a riskier approach? Given Bitcoin's volatility, most Bitcoin ETFs are considered high-risk.
- Fund Mechanics. Understand how the ETF works. Is it passively managed or actively managed? What index or sector does it track? Always review the fund’s prospectus for details.
- Historical Returns. Examine the ETF’s performance over different periods, such as one year or several years, and compare it to similar funds.
- Fees. Management and brokerage fees can significantly impact your returns. Look for ETFs with competitive expense ratios.
- Consult a Professional. If you're unsure, seek advice from a licensed financial advisor to make an informed decision.
Understanding ETF Fees
High fees can reduce your overall investment returns. The main costs associated with ETFs include:
- Management Fee. Often expressed as the management expense ratio (MER), this fee covers the fund's operational costs. Active ETFs typically charge higher fees than passive index ETFs. Fees generally range from 0.05% to 2.5%.
- Brokerage Fees. Some brokers charge a transaction fee each time you buy or sell ETF shares. These fees can be a flat rate or a percentage of the trade value. Many brokers now offer commission-free trading for stocks and ETFs.
To minimize costs, consider how often you plan to invest. If you invest frequently, low brokerage fees are essential. For lump-sum investments, avoid platforms with inactivity fees.
Where to Find ETF Information
Key details about an ETF can be found in its prospectus, which is filed with the U.S. Securities and Exchange Commission (SEC). This document includes information on fees, investment objectives, risks, and historical performance.
You can access these filings directly through the SEC’s website or on the website of the ETF’s issuing company.
Benefits of Investing in a Bitcoin ETF
Investing in a Bitcoin ETF allows you to gain exposure to Bitcoin’s price without buying it directly on a cryptocurrency exchange. This approach is ideal for including Bitcoin in retirement accounts like 401(k)s or IRAs, or in taxable brokerage accounts.
It also eliminates the need to manage private keys or use a non-custodial wallet, reducing the risk of losing your investment due to security issues.
Risks of Bitcoin ETFs
Before investing, it’s crucial to understand the potential risks involved:
- Potential Losses. Like any stock, the value of ETFs can fluctuate, leading to possible financial loss.
- Single-Asset Focus. Many Bitcoin ETFs concentrate on a single asset, making them more vulnerable to market swings compared to diversified funds.
- Tracking Errors. Fees, taxes, and other factors may cause an ETF to deviate from its intended index.
- Leveraged and Inverse ETFs. These specialized ETFs aim for amplified returns or hedge against declines but come with higher risks and complexity.
- Currency and Tax Risks. International ETFs may expose you to currency fluctuations and foreign tax liabilities.
- Synthetic ETFs. These use derivatives to mimic returns, introducing additional risks like counterparty risk.
What Is a Short Bitcoin ETF?
A short Bitcoin ETF, such as the ProShares Short Bitcoin Strategy ETF (BITI), allows investors to profit when Bitcoin’s price decreases. It provides a simpler way to bet against Bitcoin without the complexities of direct short selling.
Fund managers handle the trading of put and call options on Bitcoin futures, enabling investors to gain inverse exposure easily.
Conclusion
Our analysis shows that spot Bitcoin ETFs currently represent the best option for gaining exposure to Bitcoin’s price through a regulated investment vehicle. Whether you’re looking to invest through a retirement account or a standard brokerage, these ETFs offer a convenient and secure method.
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Frequently Asked Questions
Are ETFs good for Bitcoin?
Spot Bitcoin ETFs provide a regulated way for more people and institutions to gain exposure to Bitcoin, potentially driving its price up over time. However, some argue that concentrating Bitcoin in fewer hands contradicts its original peer-to-peer ethos.
What are the best crypto ETFs?
The best crypto ETFs are typically those that track Bitcoin. While spot Bitcoin ETFs that hold actual Bitcoin are not yet available in the US, several financial institutions have applied for approval to launch them.
Is GBTC or BITO a better investment?
GBTC is a spot Bitcoin ETF, while BITO is a futures-based ETF. GBTC generally tracks Bitcoin’s price more closely. However, other spot ETFs like FBTC or BITB offer lower expense ratios, making them attractive alternatives.
What is the new Bitcoin ETF called?
The new Bitcoin ETFs launched in early 2024 are called spot Bitcoin ETFs. They are designed to hold the actual asset and track its price directly, unlike derivative-based products.