Crypto enthusiasts who want to explore Bitcoin investments in a simpler and more regulated way can now do so easily through Bitcoin exchange-traded funds (ETFs). These investment options have changed the way people invest in cryptocurrencies, making the process less technical and more secure.
In this article, we’ll look at the top seven Bitcoin ETFs available. We will discuss the key features and expected advantages and disadvantages of each to help you make informed investment decisions.
Top 7 Best Bitcoin ETFs
- ProShares Bitcoin Strategy ETF (BITO)
- ProShares Short Bitcoin ETF (BITI)
- Valkyrie Bitcoin Strategy ETF (BTF)
- VanEck Bitcoin Strategy ETF (XBTF)
- Bitwise Crypto Industry Innovators ETF (BITQ)
- Simplify U.S. Equity PLUS GBTC ETF (SPBC)
- Global X Blockchain & Bitcoin Strategy ETF (BITS)
Although many companies offer Bitcoin ETFs, the United States Securities and Exchange Commission (SEC) has approved only a few of these investment vehicles for trading in the U.S.
The approved ETFs can hold Bitcoin futures contracts, stocks of companies, and other ETFs without exposure to cryptocurrency. Below is a comprehensive summary of the seven best Bitcoin ETFs you can trade.
1. ProShares Bitcoin Strategy ETF (BITO)
Pros
- It gives exposure to Bitcoin without buying expensive equipment to mine it.
- Investors can purchase ETF shares at a brokerage or on ProShares’ website.
- It offers the possibility of huge returns if the price of Bitcoin surges.
Cons
- The fund is managed at a high operating expense of 0.95%.
- This ETF is risky when compared to ETFs linked to stocks.
- As an investor, you can lose significantly if Bitcoin prices plummet.
Highlights
Price: $16.78
Expense ratio: 0.95%
Minimum investment amount: $10,000
Assets under management: $1.04 billion
ProShares Bitcoin Strategy (BITO), launched in October 2021, was the first Bitcoin-linked ETF approved by the Securities and Exchange Commission (SEC) for trading in U.S. markets. This ETF mimics Bitcoin’s price by investing in Bitcoin futures.
By mimicking Bitcoin’s price, BITO allows investors to speculate on the price of Bitcoin without actually investing in the cryptocurrency itself. This means investors do not need to deal with cryptocurrency wallets and private keys. Instead, they can simplify the process by investing through a broker.
2. ProShares Short Bitcoin ETF (BITI)
Pros
- It is the best choice for investors who believe Bitcoin’s price will drop.
- This ETF is trustworthy. It is issued by ProShares, the first and largest provider of bitcoin-linked ETFs in the U.S.
- Allows investors to short-sell Bitcoin for daily profits.
Cons
- It is riskier. Investors can lose an entire portfolio’s value in a day.
- The ETF has reduced returns because it charges higher brokerage commissions and expense ratios.
Highlights
Price: $39.79
Expense ratio: 0.97%
Minimum investment amount: Not Available
Assets under management: $84.27 million
ProShares Short Bitcoin ETF (BITI) is an exchange-traded fund launched in 2022. The fund attracts investors who believe Bitcoin prices will plummet. It allows such investors to short-sell Bitcoin and profit when the token’s price drops.
The ProShares Short Bitcoin ETF is currently the only ETF approved by the SEC to trade the inverse of Bitcoin’s daily performance. To close such trades, BITI links Bitcoin’s price to Bitcoin futures contracts.
Additionally, the ETF allows trading activities in the cash-settled futures market. In this market, sellers compensate buyers when the prices of the futures contract rise, and buyers compensate sellers when the contract’s price decreases. This helps BITI maintain its inverse Bitcoin exposure.
3. Valkyrie Bitcoin Strategy ETF (BTF)
Pros
- All transactions are managed through a digital asset investment firm.
- A futures market regulates all the investments made.
Cons
- The fund is not diversified as it focuses on just one type of crypto asset.
- It is an actively managed fund with a higher expense ratio.
Highlights
Price: $11.84
Expense ratio: 0.95%
Minimum investment amount: $25,000
Assets under management: $28.8 million
Another Bitcoin ETF worth investing in is the Valkyrie Bitcoin Strategy ETF (BTF). BTF launched in October 2021 to provide investors with some form of capital appreciation.
This fund is an actively-managed ETF. Actively managed ETFs are a type of investment fund that combines traditional ETFs’ features with active portfolio management. With these ETFs, fund managers actively research, analyze, and select lucrative investments. They may also actively trade or rebalance the portfolio in response to market conditions or investment opportunities.
In the BTF’s case, it invests most or all of its assets in Bitcoin futures contracts traded on exchanges. If any assets remain, BTF will hold them in U.S. government securities, money market funds, and corporate bonds. It’s worth noting that BTF does not directly invest in Bitcoin, so its price may not be the same as the current price of Bitcoin.
4. VanEck Bitcoin Strategy ETF (XBTF)
Pros
- The fund has no upfront performance or redemption fees.
- It offers investors flexible ways to manage their investments.
Cons
- Has a high minimum investment requirement.
- When you buy shares, they can only be traded through a direct brokerage account.
Highlights
Price: $29.83
Expense ratio: 0.76%
Minimum investment amount: $100,000
Assets under management: $46.50 million
Bitcoin ETF investors can also explore the VanEck Bitcoin Strategy ETF (XBTF). This actively managed ETF was launched in November 2021 to provide capital appreciation for investors.
Like many other ETFs, the fund acquires its exposure to Bitcoin through futures contracts. However, the distinguishing factor is that while other ETFs are designed as investment corporations, XBTF is designed as a C-corporation.
C-corporations are tax-efficient corporate designs with tax-tracking systems that can save investors from tax liabilities.
Besides this structural difference, XBTF also has a slightly different investment strategy. The ETF diversifies its investments from Bitcoin futures to other assets, including stocks, bonds, and cash.
5. Bitwise Crypto Industry Innovators ETF (BITQ)
Pros
- It is the cheapest option among Bitcoin and other crypto/blockchain futures ETFs.
- A team of experienced asset managers from Google and Blackstone manages the fund.
Cons
- It is more of a crypto/blockchain ETF than a Bitcoin ETF.
- Has a slightly higher expense ratio.
Highlights
Price: $8.78
Expense ratio: 0.85%
Minimum investment amount: Not Available
Assets under management: $86.3 million
Bitwise Crypto Industry Innovators ETF (BITQ) is among the best Bitcoin ETFs to invest in. This fund launched in 2021 and brought a new approach to Bitcoin ETF investments.
Instead of tracking Bitcoin futures, BITQ tracks crypto industry stocks. This means that when you buy BITQ, you bet on the future growth of the entire crypto-economy instead of just Bitcoin prices.
Additionally, BITQ’s investment results reflect the total return performance of the Bitwise Crypto Innovators 30 Index. This index was created to measure the performance of firms that service cryptocurrency markets. Such firms include crypto mining companies, crypto financial services organizations, and crypto mining equipment suppliers.
6. Simplify U.S. Equity PLUS GBTC ETF (SPBC)
Pros
- The fund has a relatively low expense ratio.
- Ideal for investors seeking little exposure to Bitcoin while investing in the S&P 500.
Cons
- As an investor, you have little control over non-crypto asset allocation.
- Trading of equity securities makes it vulnerable to stock market variations.
Highlights
Price: $24.87
Expense ratio: 0.73%
Minimum investment amount: Not Available
Assets under management: $8.70 million
The Simplify U.S. Equity PLUS GBTC ETF (SPBC), launched in 2021, is not entirely a Bitcoin ETF. It is an ETF that invests in U.S. securities, including stocks and other ETFs.
However, it offers some exposure to Bitcoin by allocating 10-15% of its assets to the Grayscale Bitcoin Trust (GBTC). This makes it one of the top Bitcoin ETFs to consider.
Bitcoin allocation aside, SPBC has diverse holdings. The ETF invests in other assets beyond the realm of cryptocurrencies, including iShares’ Core S&P 500 ETF. SPBC actively rebalances its Bitcoin holdings to 10% of its portfolio to avoid overexposure to the crypto markets.
7. Global X Blockchain & Bitcoin Strategy ETF (BITS)
Pros
- The fund invests in innovative blockchain and digital asset providers.
- Exposes you to blockchain technology stocks and crypto futures in just a single trade.
Cons
- It has just a few assets under management compared to other options, suggesting a lack of confidence from investors.
Highlights
Price: $42.00
Expense ratio: 0.65%
Minimum investment amount: $25,000
Assets under management: $14.20 million
Another leading Bitcoin ETF is the Global X Blockchain & Bitcoin Strategy ETF (BITS). This actively managed fund, launched in 2021, derives its profits from Bitcoin-linked ETFs and investments in other blockchain firms.
BITS is an ideal investment strategy because it combines Bitcoin futures with a portfolio of crypto industry stocks. Approximately 55% of the fund’s ETF is in the Global X Blockchain ETF, with 25 crypto companies specializing in mining, exchanges, hardware manufacturing, and software development.
The remaining 45% of the fund exists in monthly CME Bitcoin futures. Therefore, investors get diverse investment approaches in the blockchain and cryptocurrency space while mitigating the risks associated with a single asset class.
How to Invest in Bitcoin ETFs
If you want to invest in Bitcoin ETFs, the first step is to open a brokerage account.
There are many options for online brokers, some of which include Fidelity and Charles Schwab. Some are also available through platforms like Robinhood and Wealthfront.
Once you have an account with an online broker, you can purchase Bitcoin ETFs like you would any other stock or ETF. In such instances, you would probably search for a ticker symbol in their brokerage interface, input the number of shares you want to purchase, and click buy.
However, unlike traditional stocks, ETFs charge an annual expense ratio that is deducted from the investor’s account.
When investing, remember that Bitcoin, as with other cryptocurrencies, is a volatile class of asset. With this in mind, you should not invest more than you can afford to lose.
Is it Safe to Invest in Bitcoin ETFs?
Investing in Bitcoin ETFs rather than buying Bitcoin directly can be a simpler and safer option for many investors, primarily because of the increased security and convenience they offer.
A significant point to note is that cryptocurrency exchanges are not under the purview of financial regulators, introducing substantial risk for investors who might fall prey to scams or face a sudden loss in their digital asset’s value.
Therefore, ETFs, which are traded on regulated traditional financial markets overseen by authorities such as the SEC, provide a convenient and more secure alternative.
Most brokerage accounts are also insured, keeping your funds safe even when the broker you are dealing with becomes insolvent.
Final Thoughts
Bitcoin and other cryptocurrencies have proven to be an extremely volatile asset class capable of wide price fluctuations in short periods. However, Bitcoin ETFs offer investors a simplified and regulated pathway to gain exposure to the cryptocurrency market. These investment funds have completely changed the crypto ecosystem, as they offer convenient access without the need to own and manage Bitcoin directly.
Even with only a few SEC-approved Bitcoin ETFs, investors have a variety of options. Every ETF has pros and cons, including different expense ratios, minimum investment amounts, and risk factors.
When venturing into any Bitcoin ETFs, one must consider their investment goals and risk tolerance and remember cryptocurrencies’ inherent volatility.
FAQs
What is the largest Bitcoin ETF?
ProShares Bitcoin Strategy ETF (BITO) is the largest Bitcoin exchange-traded fund, with assets under management of around $1 billion.
What to Look for in a Bitcoin ETF
When choosing a Bitcoin ETF to invest in, focus on the individual investment strategies and holdings and metrics such as expense ratio, total assets under management (AUM), and past performance. It is, however, important to note that positive past performance does not guarantee positive future results.
Do Bitcoin ETFs invest in Bitcoin directly?
No, Bitcoin ETFs do not invest in Bitcoin directly. They provide investors with an indirect means of participating in the cryptocurrency market. In essence, Bitcoin ETFs offer exposure to the price movements and performance of Bitcoin without directly owning the cryptocurrency.
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