Traders looking to buy and sell Bitcoin can now do so with Exchange Traded Funds (ETFs). The best Bitcoin ETFs make it easy and cheap to buy and sell the cryptocurrency through an online broker rather than through the potentially riskier process of using a cryptocurrency exchange.
The Securities and Exchange Commission approved spot Bitcoin ETFs in January 2024, giving traders access to Bitcoin without having to take custody of the cryptocurrency themselves or trade with an exchange that might be fraudulent. So it is easier for everyone to get acquainted with Bitcoin.
Here are some of the best Bitcoin ETFs, including how much you pay to invest in them.
Top Bitcoin ETFs
| Fund (ticker) | YTD performance | Cost ratio |
|---|---|---|
| IShares Bitcoin Trust (IBIT) | 50.2% | 0.12% |
| Fidelity Wise Origin Bitcoin Fund (FBTC) | 50.2% | 0%* |
| ARK 21Shares Bitcoin ETF (ARKB) | 50.0% | 0.21% |
| Bitwise Bitcoin ETF Trust (BITB) | 49.8% | 0.20% |
| VanEck Bitcoin Trust (HODL) | 49.8% | 0.25% |
| Valkyrie Bitcoin Fund (BRRR) | 49.6% | 0.25% |
| Franklin Bitcoin ETF (EZBC) | 50.2% | 0.19% |
Source: etfdb.com. Data as of April 11, 2024
* From August 1, 2024, this fund will charge 0.25 percent annually.
Spot Bitcoin ETFs effectively track the price of the crypto on the same percentage basis, even if they trade at different prices. If Bitcoin rises one percent, the fund should rise one percent. So you can see that the funds are all up about the same amount, with minor differences.
Which fund should you choose? If you were to look at two McDonald’s on the same block and they both offered Big Macs, it would make sense to go with the cheaper one. It’s the same with spot Bitcoin ETFs. Because these funds give you exposure to Bitcoin in the same way, their defining characteristic is their expense ratio, the percentage of your investment they charge as a fee.
Some funds above initially charge a 0 percent fee for the first few months as they pursue a ‘land grab’ and want to grow their assets and users quickly. But those costs will eventually return when their assets cross a certain threshold or the initial period of low costs expires.
A few funds may eventually become dominant and lower their costs even further, thus attracting more investors, allowing them to lower prices even further and become more dominant.
The funds’ expense ratios are competitive with the costs of trading Bitcoin at all but the cheapest cryptocurrency trading brokers and exchanges. So these Bitcoin funds can be a good option to keep your overall costs low while trading easily through your existing online broker.
Should you invest in Bitcoin ETFs?
Of course, the existence of a cheaper and easier way to trade Bitcoin doesn’t make the digital currency a purchase, just cheaper and easier to do so. So Bitcoin ETFs are a good way for traders to play Bitcoin if that is already their intention, especially if it helps them avoid questionable crypto exchanges.
And SEC chief Gary Gensler nevertheless warned investors against cryptocurrency despite his agency’s approval of Bitcoin funds. “Investors should remain cautious about the numerous risks associated with bitcoin and products whose value is tied to crypto,” he said.
In its short life, Bitcoin has been notoriously volatile, with rapid rises and falls. That volatility has been great for experienced traders because they make money from the volatility, and it hasn’t been so bad for traders who have the guts to hold the highs and lows either. But many people tend to buy high and sell low as volatility melts their resolve.
Finally, it is vital to know that Bitcoin is not backed by anything other than trader sentiment. Unlike stocks, which are backed by the assets and cash flow of an underlying company, Bitcoin and most other cryptocurrencies rely solely on traders’ expectations to support their prices. It’s what investment experts call the “greater fool theory of investing,” as traders only make money by selling to someone else who is more optimistic about the cryptocurrency’s price potential.
For this reason, legendary investor Warren Buffett has long avoided cryptocurrency, even going so far as to say Bitcoin is “probably rat poison squared.”
Where can you buy the best Bitcoin ETFs?
Bitcoin ETFs are generally available from any broker that allows customers to buy shares on a major US exchange. The best stock trading brokers let you buy every available ETF commission-free, allowing you to get in and out of a position at a low cost.
In short
The rise of spot Bitcoin ETFs makes it easier and cheaper for traders to take a stake in the digital currency through just their traditional broker. These funds could potentially open Bitcoin up to wider adoption as a store of value and drive the cryptocurrency’s price even further.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
