2024's Top Bitcoin ETFs

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In the realm of exchange-traded funds, Bitcoin is a relatively newbie. Forbes Advisor has examined the pure-play bitcoin ETFs that are now available for trading in the US in order to further assist you in understanding this new area of the ETF world. Certain ETFs are linked to the spot market for bitcoin. Others use bitcoin futures to provide oblique exposure to this well-liked digital currency.

Techniques

The market for bitcoin ETFs has expanded with the SEC's recent approval of eleven spot ETFs. But past experience indicates that a lot of ETFs eventually switch to a new approach or delist entirely.

This list's funds are all pure-play bitcoin portfolios that provide investors with direct access to the cryptocurrency market via bitcoin futures or spot pricing. None of the funds mentioned give investors with indirect access to bitcoin via stock ownership in other blockchain-related businesses, such as cryptocurrency exchanges, mining firms, and banks that supply services to cryptocurrency businesses.

As such, we have stipulated the following for our spot bitcoin ETFs:

AUM, or assets under management, is at least $200 million for funds.

Every day, funds exchange at least $300,000 worth of shares.

We looked at other bitcoin funds in addition to the four spot bitcoin funds that our approach produced. We have requested that in order for these amounts to be included:

The funds keep their AUM at least $200 million.

Every day, funds exchange 100,000 shares.

Our "short" bitcoin fund was the only instance in which we deviated from these standards. Although it has had difficulty retaining investors' attention in the present bull market, it is well-positioned to bounce back if bitcoin ever experiences a down market.

A Bitcoin ETF: What Is It?

An exchange-traded fund that focuses its investments mostly on assets associated with the original cryptocurrency, bitcoin, is known as a bitcoin ETF. ETFs employ the money they receive from the sale of shares to investors on the open market to construct an asset portfolio.

ETFs and mutual funds are comparable. However, ETFs are exchanged directly on a stock market, much like shares of a publicly listed firm, in contrast to mutual funds.

SEC restrictions prevented bitcoin ETFs from trading bitcoin at its current spot price until January 11. Instead, fund managers have to own bitcoin futures contracts or businesses and other ETFs associated with cryptocurrencies in general. Futures are sophisticated derivatives that are best left to knowledgeable traders.

Various investors are drawn to various tactics, even though spot bitcoin ETFs now provide greater direct exposure to bitcoin. These might include futures or other means of becoming exposed to the bitcoin markets. Before purchasing a bitcoin ETF, make sure you are well-informed on its structure.

Spot Bitcoin ETFs: What Are They?

The SEC officially authorized exchange-traded funds that have a direct connection to bitcoin in January. Bitcoin ETFs referred to as "spot" funds are able to hold the digital currency with no hesitation or issues.

The new funds provide investors an opportunity to link their capital extremely closely to the daily fluctuation of bitcoin values on "spot" markets, while other funds over the last few years have offered indirect exposure.

However, not every one of the new funds will bring in enough cash from investors. That may be disastrous for a fund. Ultimately, a fund with just $50 million in total assets and yearly expenditures of 0.30% would only earn $150,000 in management fees annually. That's not much money for a marketing budget, activities related to regulatory compliance, or other essential costs.

Bitcoin Trust in Grayscale

How is it that Grayscale Bitcoin Trust has been operational since 2013 if the SEC just recently approved funds to function as spot bitcoin ETFs? When it first started off, GBTC wasn't an ETF.

GBTC transacted similarly to a closed-end fund as a trust. It was thus devoid of the very liquid and seamless redemption process that ETFs enjoy. Consequently, shares often fluctuated significantly in value relative to the underlying bitcoin. It seems sense that investors are hesitant to pay. GBTC gained parity with the other ten ETFs that obtained the SEC's permission to operate when the SEC approved its conversion to an ETF.

Other Exchange-Traded Funds for Bitcoin

Recently, spot bitcoin ETFs have gained attention. However, exchange-traded funds that make indirect bitcoin investments—like holding bitcoin futures—are not less valuable. They are only distinct approaches that aim to expose people to bitcoin in different ways.

It's important to keep an eye out for the trend where many shareholders are shifting their assets from the older funds to their more recent relatives as a result of the recent spot offerings. Funds will struggle to remain in operation if they don't keep enough assets under management.

Bitcoin ETF Charges

In some circumstances, owning a bitcoin ETF might be more costly than just buying bitcoin on a cryptocurrency market. This is the reason why: Buying and selling bitcoin on cryptocurrency exchanges usually carries one-time fees, while holding a bitcoin ETF entails an annual expense ratio cost. However, a few ETFs have temporarily eliminated those costs.

It's advisable to contemplate if you want to move any bitcoin from your exchange to an independent cryptocurrency wallet, either hot or cold. If so, there will probably be a minor withdrawal cost.

And think about your plan of departure. For you to sell, that entails paying a trading fee.

Why Should I Invest in a Bitcoin ETF Rather than Pure Bitcoin?

Buying an expertly managed exchange-traded fund (ETF) rather than holding real bitcoin may make some investors feel more comfortable adding the cryptocurrency to their portfolios.

Since bitcoin is still a relatively new investment, some consumers may be worried about passwords or private keys being lost or compromised, even if their money is kept in a secure bitcoin wallet.

Not everyone feels comfortable opening a Coinbase account, despite the fact that practically anybody can. For a variety of reasons, some people may only be able to purchase and sell stocks via their conventional brokerage accounts.

The main benefits [of investing in a bitcoin ETF] are liquidity, security, and ease of use. You have the option to invest using an existing brokerage account rather than going through the hassle of opening a new account on a cryptocurrency exchange. The mystery and dishonesty surrounding cryptocurrencies terrify a lot of people, yet ETFs from well-known providers like Fidelity or Blackrock are understood and trusted by the same individuals. Finally, the bitcoin ETFs are simple to acquire or sell thanks to their daily trading volume of billions of dollars.

— Stephen Kates, CFP, a former asset management adviser and principal financial analyst at Annuity.org

How To Select ETFs for Bitcoin

Investors should consider their risk tolerance, investment horizon, and personal financial objectives before selecting a bitcoin ETF.

Furthermore, the following elements must be taken into account while assessing any bitcoin ETF:

assets that are managed

Ratio of expenses

Volume of trades

The fund's investment approach

How to Purchase ETFs for Bitcoin

Unlike purchasing cryptocurrencies directly, establishing a bitcoin ETF is a somewhat simple procedure:

To buy a bitcoin ETF, you must first create a brokerage account. Online brokers provide a wide range of possibilities these days.

Once an investor has created their account, they may acquire bitcoin ETFs the same way they would purchase any other stock or ETF. Typically, an investor uses their brokerage interface to find the ticker symbol, input the desired number of shares, and click "buy."

An yearly cost ratio for ETFs is assessed, and the investor's account will be debited for it.

ETFs for Bitcoin's Future

The future of volatile assets such as bitcoin ETFs remains unknown. The price of a bitcoin has increased to almost $60,000 since its launch. They have now fallen below $19,000.

The question of whether cryptocurrencies in general and bitcoin in particular will be profitable long-term investments is one that each investor must answer for himself. It is advisable to get advice from a financial counselor prior to making any investing choices.

How Approvals for Bitcoin ETFs Impact Other Crypto Investments

Many investors who would not have otherwise been interested in cryptocurrency investment now have access to it thanks to the introduction of bitcoin ETFs. For instance, investors may find it more accessible or safe to invest in a spot bitcoin ETF rather than buying cryptocurrencies altogether.

Spot bitcoin ETFs have been able to buy more bitcoin as money has continued to pour into them; as a result, the supply of bitcoin has decreased and the demand has increased. Since the introduction of spot bitcoin ETFs, this has caused a notable surge in the price of bitcoin.

Investor interest has increased with the introduction of bitcoin exchange-traded funds (ETFs), especially for people who already have brokerage accounts but do not have cryptocurrency accounts. With the help of exchange-traded funds (ETFs), investors may get exposure to an asset without actually holding it someplace.

Jack Callahan, head of wealth and trading at Revolut, a multinational fintech company,

As has often happened in the brief history of cryptocurrencies, the value of a large number of other cryptocurrencies—often referred to as altcoins since they are alternatives to bitcoin—has increased in tandem with bitcoin's surge.

Applications for more spot cryptocurrency exchange-traded funds (ETFs) have also been filed to the Securities & Exchange Commission after the SEC's approval of a bitcoin ETF. Spot Ethereum ETFs, products would provide investors with additional access to Ethereum, the second-largest cryptocurrency by market capitalization, are now being considered for approval by the SEC.

Still, it seems a long way off until spot Ethereum ETFs are approved.

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FAQs

How We Operate

Are ETFs that track bitcoin a wise investment?

There are dangers associated with any investment. But cryptocurrency investments, like bitcoin, are very erratic. Never take on more risk than you can afford to lose as an investment.

Which bitcoin ETF is the best?

A list of spot bitcoin and bitcoin futures exchange-traded funds is provided. Every investor is in a different situation and has different needs and goals when it comes to investing. The greatest bitcoin ETF for each investor can only be discovered via study suited to your individual goals and circumstances.

What qualities should a bitcoin ETF have?

Like with any ETF, investors should consider various factors before investing, including holdings and investment strategies, as well as metrics like expense ratio, total assets under management, and historical performance. Remember as always that past performance does not guarantee future outcomes.

Can one use bitcoin ETFs safely?

There are dangers associated with every investment, and cryptocurrencies like bitcoin have shown to be particularly volatile. Investors must not to take on more risk than they can bear to lose. Consulting a financial expert is usually a smart idea before to making any kind of investment choice.