On January 10 2024, the SEC sanctioned the debut of spot Bitcoin ETFs. This was a milestone for the cryptocurrency, with ETFs offerings now available from major firms like Fidelity, BlackRock, and Invesco.
A spot Bitcoin ETF is a type of exchange-traded fund that mirrors the price of Bitcoin in real-time. They are a way for investors to add Bitcoin exposure to their investment portfolios through traditional investment accounts, without the need for a cryptocurrency wallet or exchange account.
These ETFs are the first instance of cryptocurrency funds directly holding Bitcoin and trading on a significant exchange.
However, it's important to recognize that despite their design to closely follow Bitcoin's price by owning the cryptocurrency, these ETFs may not precisely match Bitcoin's returns.
Before this landmark approval in January 2024, the market did feature crypto-related ETFs and trusts, but none were "spot" Bitcoin ETFs that directly held the cryptocurrency.
| Name | Fee | Notes |
| Ark 21Shares Bitcoin ETF (ARKB) | 0.21% | Fee waiver for the first six months of trading or until the fund reaches its first $1 billion in assets, whichever is first. |
| Bitwise Bitcoin ETF (BITB) | 0.20% | Fee waiver for the first six months of trading or until the fund achieves $1 billion in assets, whichever comes first. |
| Fidelity Wise Origin Bitcoin Fund (FBTC) | 0.25% | Fee waived until August 1, 2024. |
| Franklin Templeton Digital Holdings Trust (EZBC) | 0.19% | N/A |
| Grayscale Bitcoin Trust (GBTC) | 1.50% | N/A |
| iShares Bitcoin Trust (IBIT) | 0.25% | Fee reduced to 0.12% for the first 12 months of trading or until the fund accrues $5 billion in assets, whichever is first. |
| Invesco Galaxy Bitcoin ETF (BTCO) | 0.25% | Fee waived for the first six months of trading or until it reaches $5 billion in assets, whichever comes first. |
| VanEck Bitcoin Trust (HODL) | 0.25% | N/A |
| Valkyrie Bitcoin Fund (BRRR) | 0.25% | N/A |
| WisdomTree Bitcoin Fund (BTCW) | 0.25% | Fee waived for the first six months of trading or until the fund achieves $1 billion in assets, whichever comes first. |
What is a Spot Bitcoin ETF?
A Spot Bitcoin ETF (Exchange-Traded Fund) is a financial instrument that offers investors exposure to the real-time price of Bitcoin without the need to directly purchase or store the cryptocurrency.
They operate similarly to traditional ETFs, trading on stock exchanges with prices fluctuating throughout the trading day.
The key characteristic of a spot Bitcoin ETF is its direct investment in Bitcoin, aiming to track the cryptocurrency's current market price as closely as possible. This contrasts with other types of Bitcoin-related investment products, such as futures-based ETFs, which are tied to the future price predictions of Bitcoin rather than its current market price.
Essentially, a spot Bitcoin ETF simplifies the process of investing in Bitcoin, providing a bridge for traditional investors to gain exposure to Bitcoin through.
Read more: How to Earn Interest on Crypto - The Definitive Guide
How many spot Bitcoin ETFs were approved?
Out of 11 approved spot Bitcoin ETFs, 10 commenced trading the following day, January 11.
Hashdex, known for its application to include spot Bitcoin in its cryptocurrency futures ETF, also received approval. Despite this, Hashdex has not yet transitioned its DEFI ETF's holdings from Bitcoin futures to actual spot Bitcoin.
10 Best Bitcoin ETFs in 2024
1. Ark 21Shares Bitcoin ETF (ARKB)
- Expense Ratio: 0.21%
- Regulatory Compliance: Expected to follow strict SEC guidelines given ARK's reputation.
- Counterparty Risk: Managed through diversified Bitcoin exposure and reputable partnerships.
- Reputation and Expertise: ARK is known for its focus on innovation and technology, with 21Shares being a leader in crypto ETPs.
- Ease of Access: ARKB's association with ARK Invest and 21Shares ensures its availability on major U.S. trading platforms.
- Transparency: High, given ARK's commitment to investor education and disclosure.
- Fees: Waived for the initial period.
2. Bitwise Bitcoin ETF (BITB)
- Expense Ratio: 0.20%
- Regulatory Compliance: Bitwise has a track record of working within regulatory frameworks.
- Counterparty Risk: Mitigation strategies include secure storage and insurance of Bitcoin holdings.
- Reputation and Expertise: Bitwise is highly regarded in the crypto index fund space.
- Ease of Access: Accessible through platforms offering ETF trading.
- Transparency: Regular updates and reports.
- Fees: Introductory fee waiver.
3. Fidelity Wise Origin Bitcoin Fund (FBTC)
- Expense Ratio: 0.25%
- Regulatory Compliance: Fidelity's extensive experience in financial services points to strong compliance.
- Counterparty Risk: Fidelity's robust risk management practices are expected to minimize risks.
- Reputation and Expertise: Fidelity is a globally recognized asset management firm.
- Ease of Access: High, given Fidelity's large distribution network.
- Transparency: High, consistent with Fidelity's approach across its funds.
- Fees: Fee waiver until August 2024.
4. Franklin Templeton Digital Holdings Trust (EZBC)
- Expense Ratio: 0.19%
- Regulatory Compliance: Franklin Templeton's has a long history of regulatory compliance.
- Counterparty Risk: Low, through stringent investment criteria and security measures.
- Reputation and Expertise: Known for mutual fund management, expanding into digital assets.
- Ease of Access: Available to investors through traditional brokerage and investment platforms, this ETF might be attractive not just to crypto-savvy investors but to those used to more traditional sectors.
- Transparency: High, in line with the firm's standards.
- Fees: Competitive rate with no initial waiver.
5. Grayscale Bitcoin Trust (GBTC)
- Expense Ratio: 1.50%
- Regulatory Compliance: GBTC is structured as a grantor trust, which is a different regulatory framework compared to an ETF. This structure means GBTC is subject to the rules and regulations governing trusts, rather than those directly applicable to ETFs.
- Counterparty Risk: Risks are present due to the trust structure and reliance on Bitcoin's price.
- Reputation and Expertise: Grayscale is a pioneer in cryptocurrency investment products.
- Ease of Access: Good, though it trades over the counter (OTC) rather than on standard exchanges.
- Transparency: Provides regular updates on holdings but has faced criticism over fee structure.
- Fees: Highest among listed options without a waiver.
6. iShares Bitcoin Trust (IBIT)
- Expense Ratio: Initially 0.25%, reduced to 0.12% under certain conditions.
- Regulatory Compliance: iShares, managed by BlackRock, benefits from extensive regulatory experience.
- Counterparty Risk: High standards of risk management.
- Reputation and Expertise: BlackRock's iShares is a leading ETF provider globally.
- Ease of Access: Very high, given BlackRock's market presence.
- Transparency: High, with clear reporting and disclosures.
- Fees: Reduced fee for an initial period based on assets.
7. Invesco Galaxy Bitcoin ETF (BTCO)
- Expense Ratio: 0.25%
- Regulatory Compliance: Invesco's experience in ETFs ensures comprehensive compliance strategies.
- Counterparty Risk: Diversification and security measures mitigate risk.
- Reputation and Expertise: Invesco is known for innovative fund offerings.
- Ease of Access: High, as Invesco ETFs are widely available.
- Transparency: High, with detailed asset and risk disclosures.
- Fees: Introductory fee waiver.
8. VanEck Bitcoin Trust (HODL)
- Expense Ratio: 0.25%
- Regulatory Compliance: VanEck has a history of seeking to launch Bitcoin ETFs, indicating familiarity with regulatory demands.
- Counterparty Risk: Emphasis on security and insurance to reduce risk.
- Reputation and Expertise: VanEck is an established name in ETF and investment fund markets.
- Ease of Access: High, given VanEck's established distribution channels.
- Transparency: High, with regular reporting.
- Fees: Standard rate.
9. Valkyrie Bitcoin Fund (BRRR)
- Expense Ratio: 0.25%
- Regulatory Compliance: As a newer entrant, Valkyrie is expected to adhere closely to regulatory standards.
- Counterparty Risk: Focus on secure custody and diversified exposure to mitigate risk.
- Reputation and Expertise: Emerging reputation in the digital asset space.
- Ease of Access: Moderate, depending on broker availability.
- Transparency: Commitment to investor communication suggests high transparency.
- Fees: Standard without specific waivers.
10. WisdomTree Bitcoin Fund (BTCW)
- Expense Ratio: 0.25%
- Regulatory Compliance: WisdomTree's track record in ETFs suggests a strong compliance framework.
- Counterparty Risk: Strategies likely in place to mitigate risk through secure storage and insurance.
- Reputation and Expertise: Known for commodity and currency ETFs, bringing expertise to crypto.
- Ease of Access: High, given WisdomTree's presence in the ETF market.
- Transparency: Expected to be high, with detailed fund operations and holdings disclosures.
- Fees: Waived for an initial period.
What do the Approvals Mean for Bitcoin?
The approval of spot Bitcoin ETFs represents a significant milestone in the cryptocurrency's journey towards mainstream acceptance and institutional adoption. There could be a number of effects.
Related Content: The Role of Bitcoin in the Economy
1. Legitimization of Bitcoin
The approvals of spot Bitcoin ETFs by regulatory bodies like the SEC signal a significant step towards the legitimization and mainstream acceptance of Bitcoin as a legitimate asset class within the financial markets.
2. Increased Accessibility
These ETFs make Bitcoin accessible to a broader range of investors, including those who prefer traditional investment vehicles or are hesitant to engage directly with cryptocurrency exchanges and wallets.
3. Market Stability
The introduction of regulated spot Bitcoin ETFs could lead to increased market stability. By offering a more standardized and regulated way to invest in Bitcoin, these ETFs may help reduce price volatility.
4. Institutional Participation
The approvals pave the way for increased institutional investment in Bitcoin. Institutional investors, who may have been wary of direct cryptocurrency investments due to regulatory uncertainties or operational risks, might now be more inclined to invest through these ETFs.
5. Innovation and Growth
The regulatory green light for spot Bitcoin ETFs is likely to spur innovation within the financial sector, leading to the development of more crypto-related investment products and services. This could further drive growth and diversification in the cryptocurrency market.
How Can Investors Buy Spot Bitcoin ETFs?
Investing in spot Bitcoin ETFs is straightforward and can be done through most brokerage accounts. Simply need to search for the ETF's ticker symbol and purchase shares in the same manner as you would for any other stock or ETF.
Read more: Crypto vs Stocks Which Is The Better Investment?
What Are the Differences Between Bitcoin Futures ETFs and Bitcoin Spot ETFs?
The key difference lies in the underlying assets. While Bitcoin futures ETFs invest in contracts that speculate on the future price of Bitcoin, spot Bitcoin ETFs directly invest in Bitcoin itself. This distinction affects the investment's exposure to price movements, risk, and potential regulatory considerations.
Are Spot Bitcoin ETFs Better Than Futures-Based Bitcoin ETFs?
The choice between spot and futures-based Bitcoin ETFs comes down to personal preference and risk tolerance. Spot ETFs offer direct exposure to Bitcoin's price, potentially leading to more direct correlation with its market movements, while futures-based ETFs may offer advantages in terms of liquidity and lower premiums.
Is Investing in Bitcoin ETFs Risky?
Like any investment, Bitcoin ETFs carry a certain level of risk. Market volatility, regulatory changes, and the evolving landscape of the cryptocurrency market can impact investment outcomes. However, ETFs can also offer a more regulated and potentially safer way to invest in Bitcoin, compared to direct cryptocurrency ownership.
Read more: Best Bitcoin Interest Rates in 2024
What Are The Alternatives To Bitcoin ETFs?
Owning Bitcoin directly has a unique set of benefits compared to participating in a Bitcoin ETF.
Direct ownership gives you complete control over your holdings, allowing for more flexibility in how you manage and use the cryptocurrency.
It also eliminates the layer of management fees associated with ETFs, which can eat into potential profits.
Moreover, direct ownership means investors are not subject to the underlying risks of the ETF's management strategies, providing a purer form of exposure to Bitcoin's inherent value and market movements.
Earn up to 3% APY with Ledn’s BTC Growth Account
You can currently earn up to 3% APY with Ledn’s interest-earning BTC Growth Account. This is a secure, straightforward way to earn interest on your Bitcoin holdings, without the complexities of managing an investment portfolio.
Growth Account assets are ring-fenced, so you are only exposed to the counterparties that generate your interest. Any potential losses from Ledn’s other products or an unlikely event of bankruptcy will not affect Growth account assets. Monthly Open Book reports show you how your yield is generated in real time.
There is no minimum balance for Growth Accounts, and you can withdraw up to 100 BTC whenever you like.
Read more: How to Earn Interest on Bitcoin: An Actionable Guide
Conclusion
Bitcoin ETFs are a significant crypto development, offering investors new ways to engage with digital currency markets.
Whether you choose to invest in ETFs, explore alternatives like Ledn's Growth Account, or combine various strategies, the key is to stay informed and consider your investment goals.
Sponsored by 21 Technologies Inc. and its affiliates (“Ledn”). All reviews and opinions expressed are based on my personal views. There are risks involved with buying, selling, or holding digital assets as explained in Ledn’s Risk Disclosure Statement, which can be accessed here.
