The market has been anticipating it for months, and this week, the SEC finally approved 11 new spot Bitcoin (BTC-USD) ETF applications for trading in the United States. Now, it’s a good time to gain a high-level overview of these ETFs and look at the specific funds.
I’m bullish on Bitcoin for the long term and believe that these ETFs are a viable option for investors who don’t already use crypto exchanges and who don’t feel comfortable holding and managing their own Bitcoin positions.
So, What is a Spot Bitcoin ETF Anyway?
There were already multiple Bitcoin futures ETFs trading in the U.S., so people may understandably be wondering what the fanfare surrounding these new ETFs is all about. It’s important to note that spot Bitcoin ETFs are different from the previous ETFs because they are directly investing in the underlying asset, Bitcoin, rather than futures.
ETFs based on futures can stray from the price of the underlying asset they are investing in for various reasons. Spot Bitcoin ETFs will directly hold Bitcoin, so their prices should correlate more closely with the price of Bitcoin. Plus, futures ETFs are usually more expensive than ETFs that invest directly in an asset, and they bring additional complexity with them.
What Do These ETFs Mean for Bitcoin and for Investors?
The approval of these ETFs is indeed a significant milestone for Bitcoin, but I’d like to take a moment to point out that their existence doesn’t make Bitcoin more valuable in and of itself, and they won’t necessarily propel Bitcoin higher by themselves.
Bitcoin surged to a gain of 155.9% last year, and much of this gain can be attributed to excitement over firms like BlackRock (NYSE:BLK) and Fidelity filing for these ETFs over the summer and the anticipation that they would be approved. In the short term, this anticipation may be priced in.
Longer-term, the ETFs are certainly a positive for Bitcoin. They will allow investors who have stayed on the sidelines because they didn’t feel comfortable buying Bitcoin themselves to invest in it in a way that resembles buying any stock or ETF right in their own brokerage accounts. It will also allow individual investors to gain exposure to Bitcoin in their retirement accounts.
Lastly, the ETFs also have the potential to bring more institutional investors into Bitcoin, as they are regulated products trading on major U.S. exchanges.
Ultimately, the Bitcoin ETFs have the potential to bring many new investors into Bitcoin for the first time.
With this in mind, let’s briefly discuss the 11 new Bitcoin ETFs that are now here.
ARK 21Shares Bitcoin ETF (BATS:ARKB)
ARK Invest founder and CIO Cathie Wood has been a longtime supporter of Bitcoin, and now her firm has its own Bitcoin ETF, ARKB. ARK Invest is best known for its actively managed, tech-focused funds like the ARK Innovation ETF (NYSEARCA:ARKK).
ARKB features a reasonable expense ratio of 0.21%. As you’ll see, this is cheaper than that of many of its competitors listed below. As a side note, ARK will also waive this fee for the first six months or on the first $1 billion of assets invested, whichever comes first.ARK Invest’s fund will trade on the CBOE.
Based on this low fee and the likelihood that it will be highly visible, thanks to the profile of Woods and ARK Invest, ARKB is one of the most appealing choices on this list.
Bitwise Bitcoin ETP Trust (NYSEARCA:BITB)
Like ARKB, BITB is reasonably priced, with a fee of 0.20%. Like ARK Invest, fund sponsor Bitwise will also waive this fee for the first six months or for the first $1 billion in investments that it accrues, whichever comes first.
Note that this isn’t Bitwise’s first rodeo, as the asset manager also offers a number of additional crypto-related ETFs, including the Bitwise 10 Crypto Index Fund (OTC:BITW), which invests in an index of the top 10 cryptocurrencies by market cap, the Bitwise Crypto Industry Innovators ETF (NYSEARCA:BITQ), and other funds related to Bitcoin and Ethereum (ETH-USD) futures.
Fidelity Wise Origin Bitcoin Trust (BATS:FBTC)
FBTC is the offering from asset management giant Fidelity, which already allows customers to buy Bitcoin and Ethereum in their brokerage accounts. FBTC will trade on the CBOE and features a moderate expense ratio of 0.25%. Note that this fee will be waived until July 31, 2024, significantly boosting FBTC’s allure.
Given this fee, the fee waiver in place until the middle of next year, and Fidelity’s experience with crypto, this seems like a sound choice for interested investors.
Franklin Bitcoin ETF (BATS:EZBC)
The Franklin Bitcoin ETF is Franklin Templeton’s offering in the space. EZBC will trade on the CBOE and charge a moderate 0.29%, although no fee waiver is in place.
Grayscale Bitcoin Trust (NYSEARCA:GBTC)
GBTC is not a “new” offering. It launched as a trust in 2013. However, Grayscale is now converting this trust into an ETF. GBTC already has a market cap of $28 billion.
Grayscale deserves credit for being early to the game, but with an expense ratio of 1.5%, it’s hard to make a case for buying GBTC instead of one of the more cost-effective options listed above.
Hashdex Bitcoin ETF (NYSEARCA:DEFI)
DEFI will trade on the NYSE and features an expense ratio of 0.90%. It is an offering from Brazil’s Hashdex, a crypto-native asset manager that offers a large number of crypto-related funds internationally.
Invesco Galaxy Bitcoin ETF (BATS:BTCO)
BTCO is an offering from traditional asset manager Invesco (NYSE:IVZ) and digital asset management firm Galaxy Digital Holdings (OTC:BRPHF). It will trade on the CBOE, and it charges 0.39% (though this fee will be waived for the first six months or the first $5 billion in assets under management).
iShares Bitcoin Trust (NASDAQ:IBIT)
IBIT is the ETF that really set the entire spot Bitcoin ETF frenzy off when news broke that BlackRock, the world’s largest asset manager, had applied for a spot Bitcoin ETF this summer. After BlackRock’s filing, many of the other firms listed here scrambled to get their own applications in, as observers noted that BlackRock is rarely denied an ETF that it applies for.
IBIT will charge an expense ratio of 0.12% for the first year (or the first $5 billion in AUM, whichever comes first), after which this fee will increase to a still-reasonable 0.25%.
Valkyrie Bitcoin Fund (NASDAQ:BRRR)
BRRR will trade on the Nasdaq. Valkyrie will charge no fee for the first three months and then 0.49% after that. Valkyrie has several other Bitcoin-related funds, including the Bitcoin Miners ETF (NASDAQ:WGMI) and several other products related to Bitcoin, Ethereum, and other cryptocurrencies.
VanEck Bitcoin Trust (BATS:HODL)
VanEck’s aptly named HODL will charge 0.25%. VanEck has experience in cryptocurrency with products like its VanEck Digital Transformation ETF (NASDAQ:DAPP) and a Bitcoin mining ETF (which recently closed down). HODL will trade on the CBOE.
WisdomTree Bitcoin Trust (BATS:BTCW)
WisdomTree’s BTCW will charge 0.3% and trade on the CBOE. This fee will be waived for the first six months or the first $1 billion in AUM.
Looking Ahead
The approval of these ETFs was a monumental moment for Bitcoin, although it’s likely that much of this excitement was already priced in during Bitcoin’s massive 2023 rally. However, this is a positive for the long-term, as the ETFs make investing in Bitcoin a feasible option for more investors than ever before and can help to attract new investment.
It’s important to remember that investors can buy and hold their own Bitcoin directly, either through a crypto exchange like Coinbase (NASDAQ:COIN) or even through more traditional platforms like Fidelity or Interactive Brokers (NASDAQ:IBKR), without paying any management fee (although transaction fees may still apply). But for investors who don’t feel comfortable doing this, the ETFs discussed above are legitimate options for gaining exposure to the largest cryptocurrency by market cap.
In my opinion, the most attractive choices of the 11 new ETFs are ARKB, BITB, FBTC, IBIT, and HODL due to their low expense ratios, as cost is the main factor differentiating these ETFs.
Of these, I lean towards IBIT, FBTC, and ARKB. I like IBIT and FBTC because of the size and scale of BlackRock and Fidelity, and I like ARKB, given ARK’s visibility and longstanding interest in the space. I believe these factors will help to make these the three largest and most liquid of the ETFs. Lastly, GBTC is the least appealing of the 11 due to its 1.5% expense ratio.
