Summary: For those eyeing an investment in Bitcoin via an Exchange-Traded Fund (ETF), there's good news. While the financial world eagerly awaits the launch of BlackRock's iShares Bitcoin ETF (IBTC), several high-quality alternatives already exist. These options allow you to gain Bitcoin exposure ahead of anticipated institutional capital inflows.
Our team of analysts and crypto experts has diligently assessed multiple Bitcoin ETF options to offer you a well-researched guide. We've looked at crucial aspects like historical returns, risk parameters, management expertise, and liquidity to provide a top-tier list. Here are the standout Bitcoin ETFs to consider for your investment portfolio:
Best Bitcoin ETFs
In our search for standout Bitcoin ETFs, we've examined over 30 market offerings. As investors eagerly anticipate the BlackRock Bitcoin ETF, many are trying to front-run the flows by investing in current options. To guide our readers, we've considered crucial elements like historical performance, risk metrics, asset management acumen, and market liquidity. We've narrowed it down to five top-notch Bitcoin ETFs that not only offer robust returns but also serve as essential tools for discerning investors in the ever-changing crypto market.
1. ProShares Bitcoin Strategy ETF (BITO)
As a pioneer in the U.S. market, the ProShares Bitcoin Strategy ETF has seen impressive trading volumes since its inception. Targeted at U.S. investors, BITO seeks to replicate the performance of Bitcoin but does so through Bitcoin futures contracts rather than directly holding the asset. With assets under management valued at approximately $1.6 billion, the ETF primarily invests in CME Bitcoin futures contracts.
Importantly for institutional investors, the ETF's assets are custodied by J.P. Morgan, adding an extra layer of trust and security. Note that while BITO aims to mirror Bitcoin's returns, its investment in futures contracts means it doesn't hold the actual cryptocurrency.
- Fees: Carries a management fee of 0.95% per annum.
- Supported Assets: Gains exposure to Bitcoin through futures contracts.
- Regulation & Licensing: Compliant with SEC requirements.
- USD Investment Methods: Available through standard brokerage accounts.
2. VanEck Vectors Bitcoin ETF (VBTC)
As another formidable option for crypto investing, the VanEck Vectors Bitcoin ETF (often referred to as VBTC) stands out with its fully collateralized structure, backed by actual Bitcoin. Launched on November 19, 2020, it has garnered $213.90 million in assets under management (AUM) as of October 25, 2023. With an impressive year-to-date return of 105.99%, this ETF has secured its position in the market.
VBTC aims to amalgamate the allure of Bitcoin investing with the safety and ease of conventional financial systems. Unlike BITO, VBTC directly holds Bitcoin, stored securely with a regulated crypto custodian. Additionally, it has a slightly higher total expense ratio of 1.00% compared to BITO.
- Fees: Annual management fee of 1.00%.
- Supported Assets: Direct investment in Bitcoin.
- Regulation & Licensing: Domiciled in Liechtenstein, custodian Bank Frick & Co. AG.
- USD Investment Methods: Tradable on regulated stock exchanges.
3. Purpose Bitcoin ETF (BTCC)
The Purpose Bitcoin ETF has the unique distinction of being the world's first physically-settled Bitcoin ETF. With $1.29 billion CAD in assets under management and holding 26,869.603626 BTC as of October 25, 2023, this ETF is an intriguing option for those who wish to have Bitcoin exposure in their portfolios.
What sets this ETF apart is that when you invest in it, your funds are used to buy real Bitcoin, safely stored in cold storage. You essentially hold Bitcoin without the hassles of setting up a digital wallet or converting to fiat currency. Additionally, the ETF is eligible for registered accounts like TFSA and RRSP, offering tax benefits. Its management fee is 1.00%, and the ETF has capped its Management Expense Ratio (MER) not to exceed 1.50%.
- Fees: Annual management fee of 1.00%, capped MER not to exceed 1.50%.
- Supported Assets: Physically settled Bitcoin.
- Regulation & Licensing: Managed by Purpose Investments, Investment Trust structure. Regulated by OSC in Canada.
- USD Investment Methods: Tradable on stock exchanges, NAV of $6.35 USD as of October 25, 2023.
4. CoinShares Physical Bitcoin (BITC)
CoinShares Physical Bitcoin (BITC) is regarded as the fourth best option in the Bitcoin and crypto ETP landscape. With $424,982,707 USD in assets under management and a Year-To-Date performance of 107.32% as of October 26, 2023, it offers a straightforward yet secure way to gain Bitcoin exposure.
The unique feature of this ETP is its 100% backing by physically held BTC. When you invest in this product, an equivalent amount of real Bitcoin is purchased and securely stored in Komainu's custody, ensuring utmost security. It's akin to holding Bitcoin without the complexities of managing digital wallets or understanding blockchain intricacies. Furthermore, CoinShares is publicly listed on Nasdaq Stockholm, which means it adheres to rigorous compliance and external audits, enhancing its credibility.
- Fees: Management Fee of 0.98% p.a., making it one of the most cost-effective options in the market.
- Supported Assets: Physically backed by real Bitcoin, offering a direct correlation to its performance.
- Regulation & Licensing: Managed by CoinShares, which is publicly listed on Nasdaq Stockholm and subject to strict regulations and audits. This makes it a reliable choice for those concerned about regulatory compliance.
- USD Investment Methods: Available on most major stock brokers that offer ETFs.
5. 3iQ CoinShares Bitcoin ETF (BTCQ)
The 3iQ Bitcoin ETF, listed on the Toronto Stock Exchange under the symbols BTCQ and BTCQ.U, is designed to provide investors with exposure to Bitcoin, coupled with the opportunity for long-term capital appreciation. As of today, the ETF has a Net Asset Value (NAV) of CA$123,818,335 in CAD and $89,768,966 in USD. With a management fee of 1.00% and a Management Expense Ratio (MER) of 1.75%, this fund offers a competitively priced gateway to Bitcoin investment.
What distinguishes the 3iQ Bitcoin ETF is its focus on Bitcoin exposure through the MarketVector™ Bitcoin Benchmark Rate Index (BBR). This ensures that the asset's valuation aligns closely with the actual market conditions for Bitcoin. Also, the ETF's Bitcoin holdings are fully secured in cold storage, minimizing the risks associated with digital asset custody.
- Fees: The fund charges an annual management fee of 1.00% and a MER of 1.75%.
- Supported Assets: This ETF offers 100% exposure to Bitcoin, though it may vary slightly due to a small cash balance in the portfolio.
- Regulation & Licensing: 3iQ is one of Canada’s first digital asset fund managers, overseeing more than C$800 million in assets. It's regulated by FINTRAC & OSC and available for registered accounts like TFSA and RRSP.
- USD Investment Methods: The ETF is listed on the TSX and trades in CAD and USD. Its NAV per Unit as of October 25, 2023, stands at $5.6199 USD.
Best Bitcoin ETFs by AUM
For institutional investors eyeing the Bitcoin ETF space, two key factors stand out: Total Assets Under Management (AUM) and liquidity. The higher the AUM and trading volume, the more attractive the ETF is for larger investors. Here are the top five Bitcoin ETFs, ranked by AUM:
- ProShares Bitcoin Strategy (BITO): Dominating the field with an AUM of $983.88 million, this currency-based ETF offers significant exposure to Bitcoin and is particularly appealing for institutional investors.
- Bitwise Crypto Industry Innovators (BITQ): This ETF holds $72.99 million in AUM and focuses on equities in the crypto industry, presenting an alternative investment strategy.
- VanEck Bitcoin Strategy (XBTF): With an AUM of $51.78 million, this currency-focused ETF provides another reliable avenue for investing in Bitcoin.
- Valkyrie Bitcoin and Ether Strategy (BTF): This ETF manages $28.93 million in AUM and offers a mixed currency approach, covering both Bitcoin and Ether.
- Valkyrie Bitcoin Miners (WGMI): Specializing in Bitcoin mining companies, this equity-based ETF has an AUM of $16.97 million, rounding out our top five list.
Are Bitcoin ETFs Safe?
Bitcoin ETFs offer a way to gain exposure to Bitcoin without directly owning the asset, but they're inherently less safe than owning and self-custodying Bitcoin. Investors face counterparty risks, including mismanagement by the fund provider. For example, Grayscale's GBTC has come under criticism for trading at a significant premium or discount to its Net Asset Value (NAV), affecting investor returns. Additionally, GBTC charges high management fees (2%), which can erode investment gains, especially in a bear market.
Another drawback of Bitcoin ETFs is the limited flexibility in share creation and redemption compared to owning Bitcoin directly. Using GBTC as an example, it operates more like a closed-end fund and does not allow for the creation or redemption of shares based on market demand. This inflexibility can lead to discrepancies between the share price and the value of the underlying assets, which can be disadvantageous for investors.
Bitcoin ETF vs ETN vs ETP
When investing in Bitcoin without owning the digital asset directly, several financial instruments come into play: Bitcoin ETFs, ETNs, and ETPs. All of these serve the common goal of offering exposure to Bitcoin, but they do so in different ways and come with their own sets of features and risks. Here's a breakdown of each.
- Bitcoin ETF (Exchange-Traded Fund): A regulated investment fund that tracks the value of Bitcoin and trades on stock exchanges. ETFs offer high liquidity and may hold actual Bitcoin or use financial derivatives. They typically come with management fees.
- Bitcoin ETN (Exchange-Traded Note): A debt instrument issued by a financial institution that tracks the performance of Bitcoin. ETNs are less regulated than ETFs and don't own the underlying asset. Instead, they promise to pay the returns of the Bitcoin index they track, minus fees.
- Bitcoin ETP (Exchange-Traded Product): A catch-all term for investment products that track the performance of Bitcoin and are traded on stock exchanges. ETPs can include both ETFs and ETNs, as well as other structures like Exchange-Traded Commodities (ETCs). The specific regulatory framework and asset backing can vary depending on the type of ETP.
In summary, the top five Bitcoin ETFs we've reviewed offer a range of unique advantages, from futures-based exposure to direct Bitcoin investment. ProShares, VanEck Vectors, Purpose, CoinShares, and 3iQ each have specific fee structures, asset backing methods, and regulatory compliance, giving you a diversified array of options to suit your risk profile and investment objectives. Your choice among these should closely align with your personal financial goals and tolerance for risk.