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On Wednesday, Jan. 10, the Securities and Exchange Commission (SEC) approved the first-ever spot Bitcoin ETFs, including those from Fidelity, BlackRock and Invesco. In total, the SEC approved 11 spot Bitcoin ETFs, and 10 of them started trading on Thursday, Jan. 11.
What is a spot Bitcoin ETF?
A spot Bitcoin ETF is an exchange-traded fund — a highly liquid fund that changes price throughout the trading day, just like a stock — that directly tracks the price of Bitcoin, primarily by holding a large amount of the cryptocurrency itself. It’s similar to a spot gold ETF, which holds physical gold bullion on behalf of its shareholders.
As the first spot Bitcoin ETFs, the recently approved ETFs are the first cryptocurrency funds to trade on a major exchange and hold Bitcoin directly.
» See our list of the best brokers for ETF investing.
Top 10 spot Bitcoin ETFs by fee
Below is a list of the approved ETFs and their fees, in order from lowest to highest fee:
ETF name & symbol | Fee | Notes |
|---|---|---|
Franklin Templeton Digital Holdings Trust (EZBC) | 0.19% | N/A. |
Bitwise Bitcoin ETF (BITB) | 0.20% | Fee waived for first six months of trading or first $1 billion in fund assets, whichever comes first. |
VanEck Bitcoin Trust (HODL) | 0.20% | N/A. |
Ark 21Shares Bitcoin ETF (ARKB) | 0.21% | Fee waived for first six months of trading or first $1 billion in fund assets, whichever comes first. |
iShares Bitcoin Trust (IBIT) | 0.25% | Fee reduced to 0.12% for first 12 months of trading or first $5 billion in fund assets, whichever comes first. |
Fidelity Wise Origin Bitcoin Fund (FBTC) | 0.25% | Fee waived until Aug. 1, 2024. |
WisdomTree Bitcoin Fund (BTCW) | 0.25% | Fee waived for first six months of trading or first $1 billion in fund assets, whichever comes first. |
Invesco Galaxy Bitcoin ETF (BTCO) | 0.25% | Fee waived for first six months of trading or first $5 billion in fund assets, whichever comes first. |
Valkyrie Bitcoin Fund (BRRR) | 0.25% | N/A. |
Grayscale Bitcoin Trust (GBTC) | 1.50% | N/A. |
Sources: Fund websites. Data is current as of March 5, 2024 and intended for informational purposes, not for trading purposes.
It's worth noting that although spot Bitcoin ETFs are designed to track the price of Bitcoin directly by holding it, there is no guarantee that they will deliver exactly the same returns as the cryptocurrency itself.
» Ready to get started? Learn how and where to buy the new spot Bitcoin ETFs
But wait — weren’t there already Bitcoin ETFs on the market?
Yes and no. There were already crypto-related ETFs and trusts out there, but there has never been a spot Bitcoin ETF on the market before the Jan. 2024 approval.
What is a Bitcoin strategy ETF?
Bitcoin strategy ETFs attempt to track the price of Bitcoin indirectly. Many started trading well before the first spot Bitcoin ETF approvals, and they're still available today.
Some invest in Bitcoin futures, while others invest in Bitcoin mining stocks. Due to the indirect nature of these investments, these funds' returns are especially prone to deviating from the returns of Bitcoin.
Top 9 Bitcoin strategy ETFs by fee
Below is a list of Bitcoin strategy ETFs and their fees, in order from lowest to highest fee:
Fund name & symbol | Fee | Notes |
|---|---|---|
Global X Blockchain & Bitcoin Strategy ETF (BITS) | 0.65% | Mostly invested in Bitcoin futures. Also invested in the Global X Blockchain ETF (BKCH). |
Valkyrie Bitcoin Miners ETF (WGMI) | 0.75% | Invested in Bitcoin mining stocks. |
Hashdex Bitcoin ETF (DEFI) | 0.90% | Invested in Bitcoin futures. Fund has received approval to transition into a spot Bitcoin ETF, but has not done so yet. |
Bitwise Bitcoin Strategy Optimum Roll ETF (BITC) | 0.92% | Invested in Bitcoin futures. Fee reduced to 0.85% until Feb. 6, 2025. |
ProShares Bitcoin Strategy ETF (BITO) | 0.95% | Invested in Bitcoin futures. |
Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) | 0.95% | Invested in Bitcoin futures. Fee reduced to 0.85% until Oct. 2, 2025. |
Valkyrie Bitcoin and Ether Strategy ETF (BTF) | 1.24% | Invested in Bitcoin and Ether futures. |
ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) | 1.33% | Invested in Bitcoin and Ether futures. Fee reduced to 0.95% until Oct. 31, 2024. |
ProShares Bitcoin & Ether Equal Weight Strategy ETF (BETE) | 1.33% | Invested in Bitcoin and Ether futures. Fee reduced to 0.95% until Oct. 31, 2024. |
Sources: Fund websites. Data is current as of March 5, 2024 and is intended for informational purposes, not for trading purposes. These funds all have more than 50% of their non-cash-equivalent holdings invested in Bitcoin futures or Bitcoin mining stocks.
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The Bitcoin ETF price war
Ten different would-be spot Bitcoin ETF issuers filed forms with the SEC in January, disclosing the fees they intend to charge. Some were launching new funds, while others were changing existing Bitcoin strategy ETFs into spot Bitcoin ETFs.
Hashdex, which applied to hold spot Bitcoin in its crypto futures ETF, was also approved, bringing the total to 11 — although Hashdex hasn't actually changed its DEFI ETF's holdings from Bitcoin futures to spot Bitcoin yet.
The flood of SEC filings —which continued until hours before the SEC's approval announcement, and may continue still — reflected an ongoing price war between issuers. Many Bitcoin ETFs — both spot Bitcoin ETFs and Bitcoin strategy ETFs — are slashing their fees and offering limited-time promotional fee waivers.
Current Bitcoin ETF promos
The Bitwise Bitcoin ETF (BITB) currently holds the title of least-expensive Bitcoin ETF, with an expense ratio of 0.20% that is waived for the first six months of trading or first $1 billion in assets under management.
Two other funds — the Ark 21Shares Bitcoin ETF (ARKB) and the WisdomTree Bitcoin Fund (BTCW) — are also waiving their fees for the first six months of trading or first $1 billion in assets under management.
The Fidelity Wise Origin Bitcoin Fund (FBTC) is waiving its fee until August 2024.
The Invesco Galaxy ETF (BTCO) is waiving its fee for its first six months or first $5 billion of assets, while the iShares Bitcoin Trust (IBIT) is temporarily slashing its fee to 0.12% under those same terms.
The Bitwise Bitcoin Strategy Optimum Roll ETF (BITC) is slashing its fee to 0.85% until February 2025, while the Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) is slashing its fee to 0.85% until October 2025.
Two funds from ProShares — the Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) and the Bitcoin & Ether Equal Weight Strategy ETF (BETE) — are both slashing their fees to 0.95% until the end of October 2024.
Do spot Bitcoin ETFs have custodianship risk?
Most spot Bitcoin ETFs rely on a third-party custodian to actually store the Bitcoin they hold — much like how spot gold ETFs often keep their physical gold holdings in the vault of a third-party custodian.
Eight out of the 10 currently-trading spot Bitcoin ETFs use Coinbase (COIN) as their Bitcoin custodian. The only exceptions are the Fidelity Wise Origin Bitcoin Fund (FBTC), which uses Fidelity itself as a custodian, and the VanEck Bitcoin Trust (HODL), which uses Gemini.
Coinbase's dominance in Bitcoin ETF custodianship has created concerns about custodianship risk. If Coinbase ran into severe financial trouble in the future — for example, due to a cyberattack, a government penalty, or a decline in its revenue — would the holdings of Bitcoin ETFs be safe?
There are mechanisms by which ETFs — and investors themselves — could recover their holdings in the event of a Coinbase bankruptcy, but they wouldn't necessarily be instant or automatic. So custodianship risk may be something to consider while shopping for a spot Bitcoin ETF.
What do the approvals mean for Bitcoin?
Peter Eberle, the chief investment officer of California-based crypto investment firm Castle Funds, said in an email interview that the approval would have a positive impact on the price of bitcoin.
“Many investors can’t currently get exposure. For example, many people with 401(k)s, IRAs and similar accounts can’t easily access Bitcoin. These investors will be able to allocate funds going forward. This will drive demand in coming years,” Eberle said.
However, Eberle also cautioned that bullish sentiment could be overblown, because the ETF approvals do not necessarily guarantee billions of dollars of inflows on the first day of trading.
"Expectations might be too bullish for a short-term impact,” he said.
James Lawrence, the CEO of Florida-based blockchain startup NFTY Labs, said in an email interview that he was bullish on Bitcoin.
“I think we will see new all-time highs for Bitcoin,” he said, predicting that such highs could even top $100,000.
Bitcoin was trading below $47,000 in Jan. 2024, and so a price above $100,000 would entail the cryptocurrency rising in value by more than 100% from its January price.
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What do the approvals mean for other crypto investments?
“Crypto tokens are highly correlated. If BTC does make a big price move, then other tokens will also participate to some degree. It will also make it likely that we will see an ETH ETF, which could provide significant tailwinds for ETH,” Eberle said, referring to Bitcoin by its ticker symbol “BTC” and Ethereum by its ticker symbol “ETH.”
Eberle said he thinks that ETF approvals will likely be limited to Bitcoin and Ethereum for the time being.
“BTC and ETH ETFs seem the most likely candidates, since BTC and ETH already trade as commodities on the CME,” he said, referring to the Chicago Mercantile Exchange, a futures exchange. “The other tokens have greater hurdles to overcome, as the SEC still considers many to be unregistered securities.”
However, Lawrence is more bullish on these “other tokens,” which are also called altcoins.
“We will see institutions wanting to invest in smaller, more liquid assets outside of BTC and ETH,” Lawrence said. He also said he believes that crypto futures trading will persist — and perhaps grow — even after spot crypto ETFs come online, in part thanks to the launch of Coinbase’s international crypto derivatives exchange in 2023.
In sum, experts are divided about the immediate market impact of a spot Bitcoin ETF approval. They agree that it is likely to have a positive effect on the price of Bitcoin — but just how much of a positive effect, and how many other crypto assets will be affected, remains to be seen.
Disclosure: The author and editor owned Bitcoin at the time of publication.
