19 Bitcoin ETFs and related fees, promotions and holdings

Wednesday 10 January, the Securities and Exchange Commission (SEC) approved the first ever commercial Bitcoin ETFs, including those from Fidelity, BlackRock and Invesco[0]. In total, the SEC approved 11 Bitcoin spot ETFs, and 10 of these began trading on Thursday, January 11.

What is a Bitcoin spot ETF?

A spot Bitcoin ETF is a exchange-traded fund – a highly liquid fund that changes price throughout the trading day, just like a stock – that directly tracks the price of Bitcoin, primarily by holding a large amount of the cryptocurrency Yes. It’s similar to a dot Gold ETFswhich holds physical gold bars on behalf of its shareholders.

As the first spot Bitcoin ETFs, the recently approved ETFs are the first cryptocurrency funds to trade on a major exchange and hold Bitcoin directly.

Top 11 Bitcoin Spot ETFs by Fee

Below is a list of approved ETFs and their fees, in order from lowest to highest fee:

Sources: fund websites. The data is current as of May 31, 2024 and intended for informational purposes, not commercial purposes.

It’s worth noting that although spot Bitcoin ETFs are designed to directly track the price of Bitcoin by holding it, there is no guarantee that they will provide exactly the same returns as the cryptocurrency itself.

But wait: weren’t there already Bitcoin ETFs on the market?

Yes and no. Cryptocurrency-related ETFs and trusts already existed, but there had never been a spot Bitcoin ETF on the market before the January 2024 approval.

What is a strategic Bitcoin ETF?

Bitcoin strategy ETFs attempt to indirectly track the price of Bitcoin. Many began trading well before Bitcoin ETFs were first approved and are still available today.

Some invest in Bitcoin futures, while others invest in Bitcoin mining actions. Due to the indirect nature of these investments, the returns of these funds are particularly prone to deviate from Bitcoin returns.

Top 8 Bitcoin Strategy ETFs by Fee

Below is a list of Bitcoin strategy ETFs and their fees, in order from lowest to highest fee:

Sources: fund websites. The data is current as of May 31, 2024 and is intended for informational purposes, not commercial purposes. All of these funds have more than 50% of their non-cash equivalent holdings invested in Bitcoin futures or Bitcoin mining stocks.

Announcement

The Bitcoin ETF price war

Ten different potential issuers of spot Bitcoin ETFs filed forms with the SEC in January, disclosing the fees they plan to charge. Some were launching new funds, while others were switching existing Bitcoin strategy ETFs into spot Bitcoin ETFs.

The wave of SEC filings – which continued until hours before the SEC approval was announced, and may continue beyond that – reflects an ongoing price war among issuers. Many Bitcoin ETFs – both spot Bitcoin ETFs and strategic Bitcoin ETFs – are reducing their fees and offering promotional fee waivers for a limited time.

Do Spot Bitcoin ETFs Have Custody Risks?

Most spot Bitcoin ETFs rely on a third-party custodian to actually store the Bitcoin they hold, just as spot gold ETFs often keep their physical gold holdings in a third-party custodian’s vault.

Eight of the 10 currently traded Bitcoin spot ETFs use Currency base (COIN) as their custodian of Bitcoin. The only exceptions are the Fidelity Wise Origin Bitcoin Fund (FBTC), which uses Fidelity itself as custodian and the VanEck Bitcoin Trust (HODL), which it uses Twins.

Coinbase’s dominance in custody of Bitcoin ETFs has created concerns about custody risk. If Coinbase were to find itself in serious financial difficulty in the future, for example due to a cyber attack, a government sanction, or a decline in its revenue, would holdings in Bitcoin ETFs be safe?

There are mechanisms through which ETFs – and investors themselves – could recover their holdings in the event of Coinbase’s bankruptcy, but they would not necessarily be instantaneous or automatic. So custody risk might be something to consider while purchasing a spot Bitcoin ETF.

What do the approvals mean for Bitcoin?

Peter Eberle, chief investment officer of California-based cryptocurrency investment firm Castle Funds, said in an email interview that the approval would have a positive impact on the price of bitcoin.

“Many investors currently cannot get exposure. For example, many people with 401(k)s, ANGER and similar accounts cannot access Bitcoin easily. These investors will be able to allocate funds in the future. This will stimulate demand in the coming years,” Eberle said.

However, Eberle also cautioned that bullish sentiment may be overblown, because ETF approvals do not necessarily guarantee billions of dollars in inflows on the first day of trading.

“Expectations may be too optimistic for a short-term impact,” he said.

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What do approvals mean for other cryptocurrency investments?

“Crypto tokens are highly correlated. If BTC makes a large price move, other tokens will also participate to some extent. Additionally, we will likely see an ETH ETF, which could provide significant benefits for ETH,” Eberle said, referring to Bitcoin by its symbol “BTC” and Ethereum by the symbol “ETH”.

Eberle said he believes ETF approvals will likely be limited to Bitcoin and Ethereum for now.

“BTC and ETH ETFs seem like the most likely candidates, since BTC and ETH are already trading as commodities on the CME,” he said, referring to the Chicago Mercantile Exchange, a futures exchange. “Other tokens have bigger hurdles to overcome, as the SEC still considers many securities unregistered.”

» Are you interested in more ETFs? Take a look at best ETFs in terms of one-year performance.

Disclosure: The author and publisher owned Bitcoin at the time of publication.

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