Best Bitcoin ETFs In 2024

This information is designed to assist you in determining whether Bitcoin ETFs suit your investment needs and, if they are, in identifying the most suitable Bitcoin ETF for your investment portfolio.

What is a Bitcoin ETF?

Before diving into the nuances of Bitcoin ETFs, it’s essential to understand what they are. A Bitcoin ETF (Exchange-Traded Fund) provides a unique way for investors to participate in the Bitcoin market. Unlike purchasing Bitcoin directly, investing in a Bitcoin ETF means you’re investing in an asset that mirrors the value of Bitcoin. This approach offers exposure to Bitcoin’s price movements without the complexities of managing the cryptocurrency directly. These ETFs are traded on conventional stock exchanges, making them accessible through regular brokerage accounts.

What Is The Best Bitcoin ETF to buy?

When selecting the right Bitcoin ETF, several factors need consideration. Each option has its distinct features and will have implications for your investment strategy:

1. 1. Annual Management Fees:
   • Range of Fees: The fees for these ETFs vary significantly, ranging from 0.21% to 1.5%. This fee is a crucial factor in decision-making as it directly impacts your investment returns.
   • Examples: For instance, ARK Invest offers the most competitive fee at 0.21%, whereas Grayscale stands at the higher end with a 1.5% fee.

1. 2. Trading Volume and Performance:
   • Regular Trading Volume: Ensuring that your chosen ETF has a steady trading volume is essential for liquidity and performance stability.
   • Leading ETFs: Based on the initial trading week, Fidelity, Bitwise, and BlackRock have emerged as leaders in attracting Assets Under Management (AUM), which can be a marker of trust and performance.

1. 3. Issuer's Reputation and Backing::
   • Brand Loyalty and Trust: The reputation of the company issuing the ETF is paramount. Your preference might lean towards a brand you trust or have loyalty to. Alternatively, you may want to avoid brands you are unfamiliar with or have a poor track record of tracking Bitcoins price.
   • Supporting the Bitcoin Ecosystem: If you're a committed supporter of Bitcoin, options like Bitwise and VanEck might appeal to you, as they pledge a portion of their profits to fund Bitcoin core developers.

Bitcoin ETF List 2024

Currently, there are 11 approved spot Bitcoin ETFs on the market. While the primary objective of each is to mirror the price movements of Bitcoin, they do have some distinct differences:

• Grayscale - Biggest ETF - Grayscale’s GBTC stands out as the largest AUM Bitcoin ETF, primarily due to its early entry into the market as a Bitcoin investment product for institutional investors. Originally established as a trust, it transitioned into an ETF following SEC approval of Bitcoin ETFs. Historically, GBTC has experienced significant premiums and discounts in its price relative to Bitcoin. However, as an ETF, its tracking error—a measure of how closely the ETF follows the price of Bitcoin—is expected to improve.
• High Fees of Grayscale: Despite its prominence, Grayscale also demands the highest management fee among its peers, charging 1.5% annually.
• Fidelity and Blackrock – Established Names: Following Grayscale, Fidelity's FBTC and Blackrock's IBTC are notable for being products of well-established ETF brands. Both companies have a broad portfolio of ETF offerings across various markets, lending them significant credibility in the sector.
• Diverse Range of Other Providers: Beyond these leaders, there exists a diverse range of other ETF providers, contributing to a 'long-tail' effect in the market. These include names like Bitwise, 21 Shares & ARK, and Invesco & Galaxy Digital, each with its unique offering.
• Beyond Fees - The Importance of Tracking Error: While management fees are a crucial consideration for AUM, investors must also pay attention to the tracking error. This reflects the effectiveness of the ETF manager in buying or selling underlying Bitcoin in response to fund flows, impacting how closely the ETF tracks the actual price of Bitcoin.

What is the cheapest Bitcoin ETF?

Bitcoin ETF fees are annual charges levied by the issuing companies for managing these funds. These fees, which typically range from 0.19% to 1.5%, cover various expenses including fund management, marketing, and operational costs. The fee is automatically deducted from the investor's brokerage account.

Notably, some issuers also offer temporary fee waivers or reductions under specific conditions, making it crucial for investors to understand the fee structure of each Bitcoin ETF they consider. Franklin Templeton has the lowest management fee at 0.19% followed closely by Bitwise at 0.20%. Both of these ETFs also have fee waivers for early purchasers of the ETF

What is ETF tracking error and why does it matter?

Tracking error in the context of Bitcoin ETFs is a measure of how closely the ETF’s performance mirrors the price movements of Bitcoin. It's essentially the discrepancy between the ETF and the actual Bitcoin price.

This error is an indirect cost to investors, as it can lead to either underperformance or overperformance relative to Bitcoin's actual price changes. The skill of the ETF manager in managing the purchases and sales of Bitcoin, especially during significant fund inflows and outflows, heavily influences this tracking error.

Effective management minimizes the error, ensuring the ETF closely follows Bitcoin's price, whereas less adept management can lead to larger discrepancies, affecting the investment's overall efficiency and returns.

Spot Bitcoin ETF v Bitcoin Futures ETF (ProShares Bitcoin Strategy ETF - BITO)

Since 2021, Bitcoin futures have been a game-changer in the investment world, offering a unique approach to cryptocurrency exposure. However, it's crucial to understand the differences between a Spot Bitcoin ETF and the ProShares Bitcoin Strategy ETF (BITO). While a Spot ETF actually holds Bitcoin, BITO leverages futures contracts.

This key distinction affects your investment's return profile. Futures contracts come with intricate derivatives characteristics like carry and rolldown, which can significantly enhance or diminish returns compared to holding the actual cryptocurrency. As an investor, grasping these nuances is vital for aligning your portfolio with your financial goals and risk tolerance.

Buying a Bitcoin ETF v Buying Bitcoin itself

Choosing between purchasing a Bitcoin ETF or buying Bitcoin directly is a decision that hinges on ease, security, and regulatory considerations

Investors often prefer the familiarity and security of a regulated brokerage account, which comes with a long history of client trust and operational stability. These brokerage accounts offer added benefits such as robust asset protection, streamlined tax reporting, and lower fees, making them a more convenient and secure option compared to managing wallet addresses and seed phrases.

Furthermore, for retirement accounts and institutional investors, regulatory constraints may limit direct Bitcoin ownership, especially on offshore exchanges or in personal wallets. Bitcoin ETFs address these concerns by storing Bitcoins with custodians who are adept in robust security practices for digital assets.

This provides a balanced approach, combining the innovative potential of Bitcoin with the reliability and regulatory compliance of traditional investment vehicles.

Will Bitcoin ramp now that there is a Bitcoin ETF?

This pivotal move is expected to amplify institutional adoption of cryptocurrencies, offering a regulated, transparent, and accessible investment avenue. Unlike traditional investment vehicles, Bitcoin ETFs present a familiar format for asset managers to engage with digital currencies, potentially increasing the credibility and maturity of the crypto industry.

Industry leaders such as Mike Novogratz and Cathy Wood have projected that the approval of Bitcoin ETFs could lead to a surge in Bitcoin prices. This is attributed to the heightened institutional interest and investment, marking a significant milestone in the mainstream acceptance of cryptocurrencies.

It's important to note that Bitcoin ETFs were already avaliable globally in Europe, Australia and Canada but the size of the American market has renewed optimism. Flow of money is also expected to flow from Bitcoin proxies in the stock market such as Microstrategy and Marathon Digital Holdings

Bitcoin Post-ETF Price Prediction

Why do the Bitcoin ETFs have different prices?

When it comes to understanding the varying prices of Bitcoin Exchange-Traded Funds (ETFs), two key factors play a crucial role: the Net Asset Value (NAV) and the number of shares outstanding. Essentially, each Bitcoin ETF has its unique NAV, which is determined by the total value of the assets held in the ETF minus its liabilities, divided by the number of shares outstanding.

• Net Asset Value (NAV) Differences: The NAV of a Bitcoin ETF reflects the current market value of the bitcoins held in the fund. Since different ETFs may hold varying amounts of Bitcoin or different types of Bitcoin-related assets, their NAVs can differ. Additionally, the timing of asset valuation can affect the NAV, as the value of Bitcoin can fluctuate significantly within short periods.
• Variation in Shares Outstanding: The number of shares outstanding in an ETF affects its price. When an ETF issues more shares, the price per share can decrease if the increase in the number of shares isn't matched by an equivalent increase in the value of the underlying assets. Conversely, if an ETF redeems shares, the price per share can increase if the decrease in the number of shares isn't accompanied by a proportional decrease in asset value.

How to buy a Bitcoin ETF?

Investing in a Bitcoin ETF (Exchange-Traded Fund) is a straightforward process, akin to buying stocks through a brokerage account. If you're familiar with platforms like Robinhood or Webull, you're already equipped with the basic know-how required for investing in Bitcoin ETFs. Here's a step-by-step guide to get you started:

1. 1. Choose a Brokerage Platform
   • First, you need to have an account with a brokerage that offers access to the stock market. Platforms like Robinhood or Webull are popular choices due to their user-friendly interfaces and accessibility for beginners.

1. 2. Fund Your Account:
   • Before you can make any investments, ensure your brokerage account is funded. This typically involves transferring money from your bank account to your brokerage account.

1. 3. Research Bitcoin ETFs:
   • Familiarize yourself with the different Bitcoin ETFs available. You mentioned tickers like GBTC, HODL, FBTC, ARKB, IBTC, BTCW, DEFI, BITB, BRRR, and EZBC. Each of these ETFs has its own investment strategy, fees, and performance history. It's crucial to understand these aspects to determine which ETF aligns best with your investment goals and risk tolerance.

1. 4. Place an Order:
   • Once you've selected a Bitcoin ETF, log in to your brokerage account. Search for the ETF using its ticker symbol (e.g., GBTC for the Grayscale Bitcoin Trust). Enter the number of shares you wish to buy and choose the type of order you want to place (e.g., market order, limit order).

1. 5. Review and Confirm Your Transaction:
   • Before finalizing your investment, review the order details, including the total cost and any associated fees. Confirm your purchase once you're satisfied with the order.

1. 6. Monitor Your Investment:
   • After purchasing shares in a Bitcoin ETF, it's important to regularly monitor your investment. This includes tracking the performance of the ETF, staying informed about developments in the cryptocurrency market, and adjusting your investment strategy as needed.

Remember, investing in Bitcoin ETFs, like any investment, involves risks. The value of Bitcoin and related assets can be highly volatile. It's always wise to conduct thorough research or consult with a financial advisor to understand the risks and ensure that your investment choices align with your overall financial plan and risk tolerance.