Bitcoin ETFs are finally here. Whether you’re a crypto pro or new to digital currencies, you may be wondering which—if any—of the new bitcoin ETFs is worth your time.
One thing to keep in mind: Putting your money in bitcoin is just as risky as ever. Bitcoin trades at more than $65,000, close to its all-time high reached in late 2021. (A year later it had lost about three-fourths its value. Then, of course, there are the scandals that have plagued the crypto industry.)
Despite all this, the Securities and Exchange Commission recently gave the green light to nearly a dozen ETFs that track bitcoin’s “spot price”—as opposed to more complicated futures contracts.
- iShares Bitcoin Trust (IBIT)
- Fidelity Wise Origin Bitcoin Fund (FBTC)
- Bitwise Bitcoin ETF (BITB)
- Other Bitcoin ETFs to know about
- How to buy bitcoin ETFs
- How we picked
The move has made trading the digital currency cheaper and easier. Investors have already begun piling billions into the initial crop of Bitcoin ETFs and that, in turn, has led to a recent run-up in Bitcoin’s price. While the price bump may fade, a new, more convenient way to pwn the crypto currency could help it gain mainstream acceptance.
“This is the best option and the cheapest option currently available for trading bitcoin,” says Bryan Armour, a researcher at fund analysis firm Morningstar.
How to pick the best bitcoin ETF for you? As with all ETFs you should consider the cost (also known as the expense ratio) and the trading volume. Funds with high trading volume tend to be cheaper and easier to trade.
Given all the uncertainties surrounding crypto, you may also want to favor an bitcoin ETF from an established investing brand. While there are no guarantees, it may lower the chance of an unhappy surprise.
Here’s a rundown on the bitcoin ETFs that started trading last week, based on what we know so far.
Annual fee: 0.25% (after waiver expires)
Average daily trading volume: 27 million shares
Assets invested: $11 billion
BlackRock is the world’s largest asset manager overseeing $10 trillion in assets and its iShares ETF brand has long dominated the exchange-traded fund industry. Those facts alone mean the iShares bitcoin ETF should get serious consideration. Not only does iShares have tons of experience making complicated ETFs work, if anything goes wrong with IBIT, iShares would have a lot of egg on its face—and plenty to lose.
Like many of the new spot bitcoin ETFs, the iShares Bitcoin Trust uses a fee waiver to lower the initial cost of investing and attract more investors. For the first 12 months of trading or the first $5 billion in fund assets (whichever comes first), the annual fee will be just 0.12%. After that the fee will jump to 0.25%, more or less in line with many competitors.
Perhaps because iShares is already a well-established and trusted brand, IBIT was one of the most heavily traded bitcoin ETFs out of the gate. That’s an auspicious sign, since the ETF business tends to be winner-take-all, with entrenched funds difficult to dethrone. “In terms of liquidity, it seems like iShares and Fidelity really took the bull by the horns so far,” Armour says.
Fidelity Wise Origin Bitcoin Fund (FBTC)
Annual fee: 0.25% (after waiver expires)
Average daily trading volume: 10 million shares
Assets invested: $7 billion
Like iShares, Fidelity Investments is also a trusted name. Millions of Americans who know little about investing have Fidelity accounts because of its place as the largest 401(k) plan provider. As with BlackRock’s iShares, that means Fidelity stands to lose big if its bitcoin fund somehow fails to perform the way investors expect it to.
Also like the iShares’ ETF, the fee on the Fidelity Wise Origin Bitcoin ETF will be 0.25%. However, Fidelity is waiving the fee to invest until Aug. 1, 2024. While that might seem like a good deal for initial investors, it’s important to remember the fee waiver is temporary.
As far as liquidity, the ETF’s trading kicked off its first day of trading with more than $700 million worth of shares changing hands, second only to iShares’ ETF.
Bitwise Bitcoin ETF (BITB)
Annual fee: 0.2% (after waiver expires)
Average daily trading volume: 3 million shares
Assets invested: $1.7 billion
While iShares and Fidelity are mainstream brand names, Bitwise may be familiar to more experienced crypto investors. The asset manager offers a range of products that aim to repackage crypto for mainstream investors, including Bitcoin futures ETFs.
What’s more, Bitwise says it will donate 10% of BITB’s profits to three nonprofit organizations that fund Bitcoin open-source development: Brink, OpenSats and the Human Rights Foundation’s Bitcoin Development Fund. If you’re a crypto believer, Bitwise might “have the ethos that you’re looking for,” Armour says.
The Bitwise Bitcoin ETF is also a fierce competitor when it comes to cost. It’s waiving the fee for the first six months of trading or the first $1 billion in fund assets, whichever comes first. After that, the fee will jump to 0.2%—among the lowest of all the spot bitcoin ETFs we looked at. (Franklin Templeton’s bitcoin ETF will charge 0.19% after its fee waiver, which will last until Aug. 2, 2024, or the fund reaches $10 billion, whichever comes first.)
Other Bitcoin ETFs to know about
We considered all of the bitcoin spot ETFs that initially hit the market together—and we’ll inevitably have more to consider as issuers continue to jump on the bitcoin bandwagon. Here are some other spot bitcoin ETFs to know about.
Ark 21Shares Bitcoin ETF (ARKB)
Ark 21Shares Bitcoin ETF is also competitive from a fee perspective with a 0.21% management fee and a fee waiver that means it won’t charge any fee for the first six months of trading or until the fund hits $1 billion in assets.
VanEck Bitcoin Trust (HODL)
VanEck Bitcoin Trust is another option from an established ETF provider and has a 0.2% fee. Like Bitwise, Armour said Ark and VanEck are more connected with the digital asset community than a traditional issuer like Fidelity.
Grayscale Bitcoin Trust (GBTC)
Grayscale was one of the first firms to offer bitcoin in a mutual fund-like product—and GBTC has been around for nearly a decade. Still, the fund’s complicated investment strategy meant its price moves didn’t always match bitcoin’s. Following the SEC’s latest move, GBTC converted into a spot bitcoin ETF, so performance should be in line with competitors’ from here on out. One big drawback: Grayscale Bitcoin Trust’s annual fee of 1.5% was far higher than other funds we looked at.
How to buy bitcoin ETFs
Bitcoin ETFs are traded on the stock market, just like any other stock or exchange-traded fund.
That means to trade bitcoin ETFs, you need a brokerage account. If you are looking to open an account, Buy Side’s top brokerage picks include Fidelity, TD Ameritrade and more.
One thing to keep in mind: While exchange-traded funds closely track the value of their underlying assets, they frequently deviate by small amounts. Investors looking to buy bitcoin ETFs should expect to pay a price slightly above bitcoin’s actual value. Those looking to sell should expect to receive a price slightly below. These discrepancies are referred to as bid-ask spreads. Funds with higher trading volume tend to have lower bid-ask spreads.
Another thing to remember: While bitcoin trades 24 hours a day, the U.S. stock exchange is open from 9:30 a.m. to 4 p.m. most weekdays. If bitcoin’s price moves quickly while the stock market is closed, it may be difficult to trade bitcoin ETFs until markets reopen.
How we picked
Bitcoin spot ETFs, cleared by the Securities and Exchange Commission on Jan. 10, are still brand new. While most of the funds are broadly similar in design, their newness makes them hard to evaluate.
All the same, investors who want to trade bitcoin through an exchange-traded fund, need to make a choice. Our initial picks for the best bitcoin ETF were based primarily on fees and trading volume. While we didn’t necessarily highlight ETFs with the lowest absolute fee, we looked for fees on the lower end.
We also seriously considered the reputation of the firms offering these funds. Cryptocurrency investments have come with plenty of unpleasant surprises for investors. We have no particular reason to assume that will be the case with bitcoin ETFs. Nonetheless, we assumed large, established asset managers with mainstream reputations would have the most to lose if these products began to act in a way that surprised or disappointed investors—and therefore were most likely to avoid potential pitfalls.
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Meet the contributor
Mallika Mitra is a contributor to Buy Side from WSJ.
