James Royal, Ph.D.
·4 min read
Traders looking to buy and sell Bitcoin can now do so with exchange-traded funds (ETFs). The best Bitcoin ETFs make it easy and cheap to buy and sell the cryptocurrency through an online broker rather than through the potentially riskier process of using a cryptocurrency exchange.
The Securities and Exchange Commission approved spot Bitcoin ETFs in January 2024, giving traders a way to access Bitcoin without having to custody the crypto coin themselves or trade with an exchange that may be fraudulent. So it’s easier for everyone to gain exposure to Bitcoin.
Here are some of the best Bitcoin ETFs, including how much you’ll pay to invest in them.
Top Bitcoin ETFs
Fund (ticker) | YTD performance | Expense ratio |
|---|---|---|
IShares Bitcoin Trust (IBIT) | 19.2% | 0.12% |
Fidelity Wise Origin Bitcoin Fund (FBTC) | 19.3% | 0%* |
ARK 21Shares Bitcoin ETF (ARKB) | 19.5% | 0.21% |
Bitwise Bitcoin ETF Trust (BITB) | 19.0% | 0.20% |
VanEck Bitcoin Trust (HODL) | 19.1% | 0.25% |
Valkyrie Bitcoin Fund (BRRR) | 19.2% | 0.25% |
Franklin Bitcoin ETF (EZBC) | 19.2% | 0%** |
Spot Bitcoin ETFs track the price of the crypto on effectively the same percentage basis, even if they trade at different prices. If Bitcoin rises one percent, then the fund should rise one percent. So you see that the funds have all risen approximately the same amount, with minor differences.
Which fund should you choose? If you were looking at two McDonald’s on the same block and they both offered Big Macs, it would make sense to go with the cheaper one. So it is with spot Bitcoin ETFs. Since these funds give you exposure to Bitcoin in the same way, their defining feature is their expense ratio, the percentage of your investment that they charge as a fee.
Some funds above are initially charging 0 percent fees for the first few months, as they pursue a “land grab” and look to grow their assets and users quickly. But those fees will eventually revert when their assets pass a certain threshold or the initial period of low fees expires.
A few funds may eventually become dominant and be able to lower their fees still more, and so draw in more investors, enabling them to lower prices even further and become more dominant.
The funds’ expense ratios are competitive with the fees for trading Bitcoin in all but the cheapest brokers and exchanges for cryptocurrency trading. So these Bitcoin funds can be a good option to keep your overall costs low while making it easy to trade from your existing online broker.
Should you invest in Bitcoin ETFs?
Of course, the existence of a cheaper and easier way to trade Bitcoin doesn’t make the digital coin a buy, only cheaper and easier to do so. So Bitcoin ETFs are a good way for traders to play Bitcoin if that’s already their intent, especially if it helps them avoid dubious crypto exchanges.
And SEC chief Gary Gensler nonetheless warned investors about cryptocurrency despite his agency’s approval of Bitcoin funds. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto,” he said.
In its short lifetime, Bitcoin has been notoriously volatile, rocketing and plunging precipitously. That volatility has been great for adept traders since they make money on the volatility, and it hasn’t been too bad either for traders who have the stomach to hold on through the highs and lows. But many people tend to buy high and sell low, as the volatility melts their resolve.
Finally, it’s vital to know that Bitcoin is not backed by anything except the sentiment of traders. Unlike a stock, which is backed by the assets and cash flow of an underlying business, Bitcoin and most other cryptocurrencies rely solely on traders’ expectations to prop up their prices. It’s what investing experts call the “greater fool theory of investing,” since traders make money only by selling to someone else who is more optimistic about the cryptocurrency’s price potential.
For this reason legendary investor Warren Buffett has long avoided cryptocurrency, even going so far as to say that Bitcoin is “probably rat poison squared.”
Bottom line
The emergence of spot Bitcoin ETFs makes it easier and cheaper for traders to take a stake in the digital currency using just their traditional broker. These funds may well open up Bitcoin to wider acceptance as a store of value and push up the price of the cryptocurrency even more.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
