6 Best Bitcoin ETFs Of December 2023 (2024)

*All data is sourced from company filings and StockRover, current as of November 7, 2023.

There are currently only seven Bitcoin ETFs approved by the SEC for trading in the United States. However, more than 20 additional Bitcoin ETF filings are awaiting approval from the SEC, some of which are for funds that directly own Bitcoin. .

Our methodology for selecting the best Bitcoin ETFs included in this list is the following:

• Avoid ETFs trading only in blockchain related stocks or other cryptocurrencies rather than Bitcoin and Bitcoin futures.

• Filter the remaining ETFs for those with more than $10 million in total AUM.

This screen left us with six funds. As the world of Bitcoin ETFs continues to evolve, we will offer a more comprehensive methodology that selects the best from an even larger universe of similar funds.

A Bitcoin ETF is an exchange-traded fund that invests primarily in assets related to the original cryptocurrency, Bitcoin. ETFs sell shares to investors on the open market, and use the proceeds to build a portfolio of assets based on a market index, a stock market sector or another asset class like crypto.

ETFs are similar to mutual funds. However, unlike mutual funds, ETFs are traded directly on a stock exchange just like any other shares.

Bitcoin ETFs do not currently own Bitcoin itself. Rather, they own companies and other ETFs that are related to Bitcoin or cryptocurrency in general or they own Bitcoin futures contracts.

None of the six ETFs on our list own actual Bitcoin. Instead, they hold Bitcoin futures contracts, and in some cases the shares of companies and other ETFs active in the cryptocurrency space.

Bitcoin ETFs don’t own Bitcoin because the SEC is concerned that BTC is traded on non-regulated cryptocurrency exchanges. SEC Chair Gary Gensler is on the record stating that given the novel character of cryptocurrency, relying on the proven and highly regulated futures market is a much safer approach for Bitcoin exchange-traded funds.

Futures are an agreement between two parties to sell a particular asset at a future date. They allow traders to speculate about how prices may move in the future with minimal upfront investment because they frequently use leverage, or borrowed money.

Here’s how it works in the case of the ProShares Bitcoin Strategy ETF (BITO). The fund buys positions in one-month CME Bitcoin futures contracts. As the contracts near expiration, the fund gradually sells them and buys longer-dated contracts.

If the price of BTC is rising, BITO uses its gains to add to a pool of funding held in cash and Treasuries. If the price of BTC falls, it takes funds from the pool to pay for the losses on futures contracts.

Most of the Bitcoin ETFs included here use a similar strategy. Note that by attempting to earn money opposite to BTC’s price moves, the ProShares Short Bitcoin ETF (BITI) follows a slightly different strategy.

None of these approaches are perfect. Tracking the price of Bitcoin doesn’t always replicate the performance of the underlying market, and there are extra costs as the managers roll forward the futures contracts they’re buying.

Owning a Bitcoin ETF may be more expensive than simply purchasing Bitcoin on a crypto exchange. Here’s why: Cryptocurrency exchanges typically charge one-time fees to buy and sell Bitcoin, while owning a Bitcoin ETF incurs an annual expense ratio fee.

Say you want to buy Bitcoin on the exchange Coinbase. You would likely pay around 0.5% of your purchase price as a fee. This is less than you would pay over the course of a year when you invest in a Bitcoin ETF, which all charge at least 0.65% per year.

But this trading fee isn’t all you have to keep in mind. You should also consider if you’ll want to transfer your Bitcoin off of your exchange to a separate hot or cold crypto wallet. If that’s the case, you’ll likely be on the hook for withdrawal fees, which are typically pretty small but vary by exchange.

At Coinbase, these clock in at 1% per withdrawal transaction. Depending on the amount of Bitcoin you’re transferring, that likely works out to be pretty negligible but is still important to keep in mind.

You’ll also want to consider your exit strategy. Even HODLers who plan to stick with the cryptocurrency long term will need to sell portions of their holdings. That means paying a trading fee again when you sell. Again, these fees clock in at about 0.5% on Coinbase.

That said, shorter-term holders of an ETF may not mind the comparatively higher fees they incur because of the convenience provided by ETFs.

Some investors may feel safer getting exposure to Bitcoin in their portfolios by purchasing a professionally managed ETF than they do owning actual BTC.

Widespread adoption of Bitcoin as an investment is relatively recent, and some people may be concerned about hacking or losing passwords or private keys needed to access their investment when it’s stored in a secure Bitcoin wallet.

In addition, not everyone has found that buying Bitcoin via a crypto exchange is for them. While almost anyone can open a Coinbase account, for instance, not everyone is comfortable doing so. Others may be restricted to buying and selling securities in their traditional brokerage accounts for various reasons.

Many people choose to invest for retirement in an individual retirement account (IRA) or a 401(k) plan. If a retirement investor would like to get a modest amount of exposure to Bitcoin without opening an account at a crypto exchange or a Bitcoin IRA, owning shares of a Bitcoin ETF isn’t a terrible option.

The first step in purchasing a Bitcoin ETF is to open a brokerage account. There are many options for online brokers these days.

Once an investor has opened their account, they can purchase Bitcoin ETFs the same way they would purchase any other stock or ETF. In most cases, the investor will simply search for the ticker symbol in their brokerage interface, enter the amount of shares they want to purchase and click buy.

However, unlike with traditional stocks, ETFs charge an annual expense ratio, which will be deducted from the investor’s account.

Investors should also keep in mind that cryptocurrencies such as Bitcoin are a relatively new and volatile asset class. Nobody should invest more than they can afford to lose, and it’s always a good idea to consult a financial advisor prior to any investment decision.

Bitcoin and other cryptocurrencies have proven themselves to be an extremely volatile asset class, capable of wide price swings in short periods of time.

Nobody knows what the future of these assets will be. Since inception, Bitcoin prices have soared to more than $60,000 per coin and subsequently dropped below $19,000.

Whether cryptocurrencies, and Bitcoin in particular, will make for good long-term investments, each individual investor can only decide for themselves. However, it’s always recommended that investors consult with a financial advisor before making any investment decisions.

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