The best bitcoin exchange-traded funds of 2024 offer price exposure to the original crypto that is close to the asset itself without the necessity of purchasing it directly. That can be advantageous for various reasons, many of them regulatory.
Bitcoin ETFs can help and offer investors the benefit of not having to store their own bitcoin, which can be intimidating for novices and heighten your risk, depending on your route.
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Best bitcoin ETFs
- ProShares Bitcoin Strategy ETF (BITO).
- ProShares Short Bitcoin Strategy ETF (BITI).
- Valkyrie Bitcoin and Ether Strategy ETF (BTF).
- Global X Blockchain and Bitcoin Strategy ETF (BITS).
About picking the best bitcoin ETFs
As of Jan. 10, the U.S. Securities and Exchange Commission has greenlighted multiple spot bitcoin ETFs from various providers, including VanEck, WisdomTree and BlackRock. However, given that these ETFs are new, they will be featured in later rankings once sufficient information is available on their liquidity and performance.
In screening for the best bitcoin ETFs, we analyzed fees, assets under management and trading volumes, among other factors.
Best bitcoin ETFs
Valkyrie Bitcoin Strategy ETF (BTF)
Total assets
$49.2 million
Expense ratio
1.24%
Why it made our list
BTF is another bitcoin futures ETF launched in the fourth quarter of 2021 when the cryptocurrency market was hot. Valkyrie’s fund today has net assets of $56 million. The fund aims to allocate as close to most of its net assets as it can to bitcoin futures contracts.
While the fund is structured in an easy-to-comprehend way, the expense ratio of 1.24% is on the pricey side.
Pros and cons
Pros
- Provides dual exposure to bitcoin and ether futures
- Valkyrie is well-versed in the digital asset space.
- Actively managed fund.
Cons
- Higher 1.24% expense ratio.
- The use of both bitcoin and ether futures can result in greater tracking error compared to bitcoin spot price.
- Higher bid-ask spread of 0.11%.
Global X Blockchain and Bitcoin Strategy ETF (BITS)
Total assets
$26.9 million
Expense ratio
0.65%
Why it made our list
BITS is different from the other funds on this list in that it splits its exposure between bitcoin futures contracts and holdings in blockchain companies. It achieves the latter through investing in its sister ETF, the Global X Blockchain ETF (BKCH), which, as of the time of writing, comprises just under 50% of its holdings. This gives investors exposure to both bitcoin futures prices and the returns of publicly traded companies in the crypto ecosystem like miners and exchanges.
Pros and cons
Pros
- Boasts significantly lower fees than other bitcoin ETFs.
- If you want to gain exposure to the blockchain sector beyond bitcoin, this ETF offers that through its BKCH holdings.
- Convenient way to somewhat diversify within crypto, although underlying assets are all correlated.
Cons
- Potential to underperform both rivals and bitcoin should the underlying ETF BKCH lag the market.
- Less of a direct investment in bitcoin and more of a wider investment in the crypto space.
- Requires more due diligence to ascertain what underlying stocks you are exposed to via BKCH.
Compare the best bitcoin ETFs
| FUND | TICKER | TOTAL ASSETS | EXPENSE RATIO | |||||
|---|---|---|---|---|---|---|---|---|
| BITO | $1.7 billion | 0.95% | |||||
| ||||||||
| BITI | $79.1 million | 0.95% | |||||
| ||||||||
| BTF | $49.2 million | 1.24% | |||||
| ||||||||
| BITS | $26.9 million | 0.65% | |||||
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Methodology
We have reviewed some of the biggest bitcoin ETFs approved for trading by the SEC. With the space constantly evolving, the list could change going forward.
For our “best of” ranking, we assessed the ETF prospectuses to break down how exactly the funds gain exposure to bitcoin as well as what other exposure, if any, is pursued. To gain bitcoin exposure, all these ETFs invested in futures contracts, described in further detail below.
We also compared fee structure, which is vital concerning bottom-line returns to investors, as well as how each fund is structured.
Why other bitcoin ETFs didn’t make the cut
We made a conscious decision to exclude funds with assets under management below $20 million. This criterion was set to ensure ample liquidity and reliability for investors considering these ETFs.
By focusing on bitcoin ETFs with assets of at least $20 million, we aim to guide investors toward options that are potentially more stable and less likely to be delisted but also more liquid.
This liquidity is crucial in reducing transaction costs, such as bid-ask spreads, and ensuring that investors can enter and exit positions with ease, which is particularly important in the volatile cryptocurrency market.
Final verdict
The bitcoin ETF space is rapidly evolving with the advent of new spot bitcoin ETFs, which will reshape the market significantly. However, until these new entrants establish a solid track record and the competitive dynamics settle down, investors have reliable options in the existing futures-based ETFs.
The ProShares Bitcoin Strategy ETF (BITO) is our top pick in the current environment. BITO has one of the longest track records among its peers, offering investors a more extensive history to assess its performance and management.
In terms of liquidity, BITO leads with the highest net assets among this group of selected funds, which not only implies stability but also minimizes risks related to low liquidity, such as ETF closure or high bid-ask spreads. The ETF also demonstrates strong trading volume and favorable bid-ask spreads, ensuring efficient transactions for investors.
Furthermore, BITO’s management by ProShares adds a layer of trust and expertise. ProShares is well known for its proficiency in handling exotic ETFs that utilize leverage and derivatives. This experience is invaluable in managing a futures-based bitcoin ETF, where understanding the nuances of derivatives is crucial.
Buying bitcoin vs. buying bitcoin ETFs
When you buy bitcoin directly, you have full control over your cryptocurrency, stored in a digital wallet and secured by your private keys. In contrast, investing in a bitcoin ETF means you own shares in the fund, not the bitcoin itself, with the fund manager holding the underlying assets.
Buying bitcoin
Buying a bitcoin ETF is not the same as directly purchasing bitcoin, and the adage “not your keys, not your coins” is quite pertinent in this context. This phrase highlights the fundamental differences in ownership and control between holding actual bitcoin and investing in a bitcoin ETF.
The differences extend to aspects like tracking errors and fees. Bitcoin ETFs aim to track the price of bitcoin. But factors like the ETF creation process and management fees can cause slight deviations from the actual price of bitcoin.
Trading hours also differ, as ETFs are traded during set hours on business days, while bitcoin trades continuously, 24/7. This can lead to gaps in the price of a bitcoin ETF at market open if bitcoin’s price significantly changes outside of regular trading hours.
However, there are some advantages, For instance, ease of trading is a notable benefit of bitcoin ETFs. They can be bought and sold in any brokerage account, unlike bitcoin, which requires a cryptocurrency exchange.
Buying bitcoin ETFs
Many bitcoin ETFs own bitcoin futures contracts, which are agreements to purchase an asset at a specified point in the future. They tend to be more closely regulated while still closely tracking the underlying asset — bitcoin — and offering good liquidity.
But there are cons to this approach. The futures are dated at a specific point in the future, meaning they must be continuously rolled over as time progresses and replaced with longer-dated contracts. There is a cost to this process, which increases fees for investors.
On Jan. 10, a significant development occurred when the SEC approved spot bitcoin ETFs. These ETFs operate differently, as they are designed to hold actual bitcoin. The way these funds operate is through a cash creation process.
When investors put money into this type of ETF, the fund uses that cash to purchase bitcoin, adding it to its holdings. Conversely, when shares of the ETF are redeemed, the equivalent amount of bitcoin is sold, and the cash is returned to the investor. This approach allows the ETF to closely track the actual spot price of bitcoin, as the fund’s value directly reflects the amount of bitcoin it holds.
Spot bitcoin ETFs provide a more direct exposure to the cryptocurrency, potentially making them a more attractive option for investors looking for an investment product that closely mirrors the performance of bitcoin itself.
How to invest in bitcoin ETFs
Investing in bitcoin ETFs is a process similar to buying any other ETF. Here’s a simple guide on how to do it:
- Finding the ETF: First, log in to your brokerage account. To find bitcoin ETFs, you can use the search function and type in “bitcoin.” This should bring up a list of relevant results. However, be cautious to differentiate between an actual ETF and other investment vehicles like closed-ended trusts or direct futures contracts. If you already know the specific ETF you want to invest in, you can enter its ticker symbol.
- Calculating your investment: Decide on the number of shares you wish to purchase and calculate the total investment amount based on the current price of the ETF. Most brokerage platforms will automatically calculate this for you once you input the number of shares you intend to buy.
- Placing the order: When placing your order, it’s generally recommended to use a limit order. A limit order allows you to specify the maximum price you are willing to pay per share. This approach gives you control over the price, unlike a market order, which executes the trade at the current market price. Using a limit order can help prevent buying at a higher price in a volatile market, which is a common scenario with assets related to cryptocurrencies.
- Executing the order: After placing your order with the specified conditions, it will execute once a seller is willing to meet your price. This process can be instantaneous or may take some time, depending on market conditions and your specified price.
- Holding the ETF: Once the order is executed, the bitcoin ETF shares will be added to your portfolio. As with other ETFs, if the bitcoin ETF rebalances its portfolio or realizes capital gains, you may receive periodic distributions.
Frequently asked questions (FAQs)
One of the largest bitcoin funds listed on the U.S. market is the Grayscale Bitcoin Trust, with over $28 billion in assets as of the time of this writing.
Whether bitcoin ETFs are a good investment varies significantly from one investor to another. For certain individuals, they can be a suitable addition to an investment portfolio.
This typically includes those who have a comprehensive understanding of the cryptocurrency asset class and its inherent risks. Such investors should be prepared for the possibility of losing their entire investment due to the highly speculative nature of bitcoin.
They should also have a high tolerance for volatility, as the price of bitcoin can fluctuate wildly.
Bitcoin ETFs may not be as suitable for beginners who are still learning about various asset classes and their respective risks. The complexity and volatility of bitcoin can be overwhelming and risky for those new to investing.
