Best Bitcoin ETFs: The emergence of Bitcoin as a mainstream investment asset has led to the rise of various financial products designed to provide exposure to this cryptocurrency. Bitcoin ETFs (Exchange-Traded Funds) are one such vehicle, allowing investors to access Bitcoin through traditional brokerage accounts without purchasing or storing the asset directly. With the growing demand and regulatory approval in certain regions, Bitcoin ETFs have become a popular option for diversifying their portfolios with cryptocurrency. In 2024, several Bitcoin ETFs stand out as the best choices for investors.
ProShares Bitcoin Strategy ETF (BITO)
The ProShares Bitcoin Strategy ETF (BITO) was the first Bitcoin futures ETF to receive approval in the United States, launching in October 2021. BITO exposes investors to Bitcoin through futures contracts, meaning it doesn’t directly hold Bitcoin but instead tracks the price movement of Bitcoin futures traded on the Chicago Mercantile Exchange (CME).
Expense Ratio: 0.95%
Key Features
- It is based on Bitcoin futures, not spot prices.
- Offers regulated exposure without the complexities of holding actual Bitcoin.
- More accessible through traditional brokerages.
Pros
- First-mover advantage with strong liquidity.
- It avoids the risks of hacking or custody issues associated with owning Bitcoin directly.
Cons
- It can suffer from “contango,” where future prices are higher than spot prices, leading to potential tracking discrepancies.
BITO remains a favorite for investors seeking indirect exposure to Bitcoin through futures.
Valkyrie Bitcoin Strategy ETF (BTF)
Launched shortly after BITO, the Valkyrie Bitcoin Strategy ETF (BTF) also focuses on Bitcoin futures rather than direct Bitcoin holdings. It’s another option for investors looking for a regulated Bitcoin futures product.
Expense Ratio: 0.95%
Key Features:
- Tracks Bitcoin futures contracts.
- A competitor to BITO with a similar structure and objectives.
Pros:
- Similar to BITO in terms of risk exposure and convenience.
- Offers diversification options for those wanting more than one futures-based Bitcoin ETF.
Cons:
- Futures-based strategy means potential tracking issues, especially during volatile periods.
Though slightly behind BITO in terms of assets under management (AUM) and liquidity, BTF offers a credible alternative for futures-based Bitcoin exposure.
VanEck Bitcoin Strategy ETF (XBTF)
The VanEck Bitcoin Strategy ETF (XBTF) joined the Bitcoin futures ETF market soon after Valkyrie and ProShares, providing investors another option to gain exposure to Bitcoin via futures contracts. VanEck is a well-respected name in the ETF industry, bringing credibility and trust to the product.
Expense Ratio: 0.76%
Key Features:
- Tracks Bitcoin futures contracts.
- Managed by VanEck, a reputable ETF provider.
Pros:
- Lower expense ratio compared to competitors like BITO and BTF.
- Provides a cost-efficient way to gain Bitcoin exposure through futures.
Cons:
- As with other futures-based products, there’s the potential for divergence from spot Bitcoin prices.
XBTF is attractive for cost-conscious investors looking for futures-based Bitcoin exposure with a lower expense ratio.
Global X Blockchain & Bitcoin Strategy ETF (BITS)
The Global X Blockchain & Bitcoin Strategy ETF (BITS) provides a diversified approach by offering exposure to Bitcoin futures and blockchain-related companies. This combination allows investors to benefit from Bitcoin’s price movements and the growth of blockchain technology.
Expense Ratio: 0.65%
Key Features:
- Invests in Bitcoin futures contracts.
- Provides exposure to companies involved in the blockchain ecosystem.
Pros:
- Diversified exposure to both Bitcoin and blockchain companies.
- Lower expense ratio compared to other Bitcoin futures ETFs.
Cons:
- More diluted exposure to Bitcoin price movement due to the inclusion of blockchain stocks.
BITS appeals to investors looking for a more diversified way to invest in the cryptocurrency space without focusing solely on Bitcoin.
Purpose Bitcoin ETF (BTCC)
For investors outside the U.S., particularly in Canada, the Purpose Bitcoin ETF (BTCC) offers direct exposure to Bitcoin. BTCC was the world’s first physically-backed Bitcoin ETF, launched in Canada in February 2021. Unlike futures-based ETFs, BTCC holds actual Bitcoin, allowing for closer tracking of Bitcoin’s spot price.
Expense Ratio: 1.00%
Key Features:
- It holds physical Bitcoin, not futures.
- Available to Canadian investors and some international investors.
Pros:
- Tracks Bitcoin’s spot price closely.
- Avoids the potential issues associated with futures contracts.
Cons:
- Higher expense ratio.
- Available primarily to Canadian investors.
BTCC remains one of the best options for investors seeking direct exposure to Bitcoin, especially those outside the U.S.
CI Galaxy Bitcoin ETF (BTCX)
Another Canadian offering, the CI Galaxy Bitcoin ETF (BTCX), is a physically-backed Bitcoin ETF that provides investors with direct exposure to Bitcoin. CI Financial, a major Canadian asset manager, manages BTCX in partnership with Galaxy Digital, a leading cryptocurrency investment firm.
Expense Ratio: 0.40%
Key Features:
- Holds physical Bitcoin.
- They are managed by experienced teams in both traditional finance and cryptocurrency.
Pros:
- The low expense ratio for a physically-backed Bitcoin ETF.
- Direct exposure to Bitcoin’s spot price.
Cons:
- Like BTCC, it’s limited to Canadian markets.
BTCX stands out for its low expense ratio and physical backing, making it a strong choice for Canadian investors.
Grayscale Bitcoin Trust (GBTC)
Although not technically an ETF, the Grayscale Bitcoin Trust (GBTC) deserves mention due to its influence on the market. GBTC operates similarly to an ETF, allowing investors to buy shares representing Bitcoin exposure. However, it’s structured as a trust rather than an ETF, leading to differences in how it operates.
Expense Ratio: 2.00%
Key Features:
- Holds physical Bitcoin.
- Available to U.S. investors via over-the-counter (OTC) trading.
Pros:
- Longest-running Bitcoin investment product in the U.S.
- It provides direct exposure to Bitcoin without the need to manage wallets or custody.
Cons:
- Trades at a premium or discount to the underlying Bitcoin value.
- High expense ratio compared to other products.
GBTC is a popular choice for investors who want Bitcoin exposure but don’t mind its higher fees and occasional discrepancies between share prices and the underlying asset.
Conclusion
As Bitcoin becomes an increasingly popular investment, the number of ETF options for exposure continues to grow. For U.S.-based investors, futures-based ETFs like ProShares Bitcoin Strategy ETF (BITO) and Valkyrie Bitcoin Strategy ETF (BTF) provide a regulated way to gain exposure without the complexity of holding physical Bitcoin. Meanwhile, Canadian investors have access to physically-backed ETFs like Purpose Bitcoin ETF (BTCC) and CI Galaxy Bitcoin ETF (BTCX), which offer more direct exposure to Bitcoin’s spot price.
When selecting a Bitcoin ETF, consider factors such as expense ratios, the underlying asset (futures or physical Bitcoin), and accessibility in your region. Each ETF has its strengths and weaknesses, but collectively, it provides various options for investors looking to enter the world of cryptocurrency through traditional investment vehicles.
