Top Performing Bitcoin Exchange-Traded Funds Worth Investing In Currently
Investing in Bitcoin doesn't always mean directly owning the cryptocurrency. A Spot Bitcoin Exchange-Traded Fund (ETF) offers an alternative way to gain exposure to Bitcoin without the complexities of managing crypto wallets or private keys.
Advantages of a Spot Bitcoin ETF
A Spot Bitcoin ETF holds actual Bitcoin as the underlying asset, providing direct price exposure that closely tracks the real-time Bitcoin price. This eliminates the need to roll over contracts or worry about expiration, avoiding costs associated with futures contract management.
The lower tracking error results in potentially better performance aligned with Bitcoin’s price movements. Spot Bitcoin ETFs appeal to institutional investors as a regulated, transparent vehicle with clear Bitcoin backing, facilitating larger inflows and liquidity.
Disadvantages of a Spot Bitcoin ETF
Potential security risks are a concern, such as custody risks or hacking. However, most ETFs work with reputable custodians who use advanced security measures like cold storage and insurance.
As a newer product, spot Bitcoin ETFs might have less historical performance data and liquidity compared to futures ETFs, though adoption is growing rapidly. Because it directly reflects Bitcoin price volatility, it may be unsuitable for risk-averse investors, requiring careful portfolio allocation.
Advantages of a Bitcoin Futures ETF
Futures ETFs do not hold actual Bitcoin, instead holding regulated futures contracts traded on exchanges like CME. This may be preferable for some regulatory or trust considerations. Futures ETFs were the first Bitcoin ETFs approved, allowing earlier access to Bitcoin exposure through traditional brokerage platforms.
Disadvantages of a Bitcoin Futures ETF
Requiring constant rolling of expiring futures contracts incurs costs and complexity. Subject to “contango”, a market situation where futures prices are higher than spot prices, which can erode returns over time and create a performance drag. Futures ETFs experience larger tracking errors relative to the actual Bitcoin price, meaning they can perform worse than spot ETFs over long periods.
Comparison
| Feature | Spot Bitcoin ETF | Bitcoin Futures ETF | |-------------------------|----------------------------------------------|----------------------------------------------| | Underlying asset | Actual Bitcoin | Bitcoin futures contracts | | Price tracking | More accurate with minimal tracking error | Subject to tracking errors and contango | | Expiration/rollover | No expiration or rollover needed | Continuous rolling of contracts required | | Custody risk | Custody of actual Bitcoin, with managed risk | No direct custody of Bitcoin | | Regulatory acceptance | Approved later (starting 2024) | Approved earlier; more established | | Suitability for investors| Generally better for long-term investors with tolerance for volatility | May be more suitable for some regulation-focused investors |
Investing in a Spot Bitcoin ETF
To invest in a Spot Bitcoin ETF, create a brokerage account by providing personal information, verifying your identity, and linking your bank account. Place your order by searching for the ETF's ticker symbol in your brokerage platform, entering the number of shares you want to buy, and confirming the purchase.
Some top Spot Bitcoin ETFs include IBIT, FBTC, GBTC, ARKB, BITB, BTC, and HODL, each with varying expense ratios, assets under management, and returns. For example, HODL has a 0.20% expense ratio (currently waived under $2.5 billion AUM), donating 5% of its profits to Bitcoin Core development. ARKB offers a competitive fee of 0.21% and has grown to $5.25 billion in AUM, with a 1-year return of 3.32%.
Monitor your investment through your brokerage platform, tracking its performance, understanding market trends, and adjusting your investment strategy as needed. The best Bitcoin ETF for your portfolio depends on factors like fees, liquidity, and assets under management.
Deposit funds into your account to have the capital ready for your investment. BTC offers a reduced fee of 0.15%, making it one of the most affordable Bitcoin ETFs on the market. IBIT is the largest and most influential spot Bitcoin ETF, with over $57 billion in assets under management. BITB has a low expense ratio of 0.20% and offers transparent management, with $4.45 billion in AUM and a 1-year return of 2.64%. FBTC is a top-tier spot Bitcoin ETF with over $21.9 billion in AUM, leveraging Fidelity's internal custody system.
By investing in a Spot Bitcoin ETF, you can gain exposure to Bitcoin's price movements without the complexities of managing crypto wallets or private keys.
- A Spot Bitcoin ETF, such as HODL or ARKB, invests in actual Bitcoin and provides direct price exposure, eliminating the need to roll over contracts or manage wallets.
- Spot Bitcoin ETFs, due to their use of reputable custodians with secure measures, mitigate potential security risks related to custody or hacking.
- As more individuals learn about Spot Bitcoin ETFs, their ability to provide a regulated, transparent avenue for investing in Bitcoin leads to growing liquidity and wider adoption.
- A Spot Bitcoin ETF, like IBIT or BITB, enables you to invest in Bitcoin without having to deal with the complexities of managing crypto wallets, private keys, or handling the day-to-day maintenance of your investment through an electronic brokerage platform.
