7 Best Bitcoin ETFs Of February 2024

7 Best Bitcoin ETFs Of February 2024

In the realm of exchange-traded funds, Bitcoin is a relatively newbie. Exchange-traded funds (ETFs) linked to bitcoin futures began trading in 2021, however U.S. authorities did not permit exchange-traded funds that were directly linked to the daily fluctuations in bitcoin values, or spot prices, until January 2024.

Forbes Advisor has examined the pure-play bitcoin ETFs that are presently offered for trading in the US in order to further assist you in understanding this new area of the ETF world. Certain ETFs are linked to the spot market for bitcoin. Others use bitcoin futures to provide oblique exposure to this well-liked digital currency.

The market for bitcoin ETFs has expanded with the SEC’s recent approval of eleven spot ETFs. But past experience indicates that a lot of ETFs eventually switch to a new approach or delist entirely.

This list’s funds are all pure-play bitcoin portfolios that provide investors with direct access to the cryptocurrency market through bitcoin futures or spot pricing. None of the funds mentioned give investors with indirect access to bitcoin through stock ownership in other blockchain-related businesses, such as cryptocurrency exchanges, mining firms, and banks that supply services to cryptocurrency businesses.

As such, for our spot bitcoin ETFs we have demanded that:

Funds possess a minimum of $200 million in assets under management, or AUM.

Funds trade a minimum of $300,000 in shares daily.

Beyond the four spot bitcoin funds that our strategy yielded us, we also reviewed alternative bitcoin funds. For these funds to be included, we have demanded that:

Funds maintain a minimum of $200 million in AUM.

Funds trade 100,000 shares daily.

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Grayscale Bitcoin Trust (GBTC)

iShares Bitcoin Trust ETF (IBIT)

Invesco Galaxy Bitcoin ETF (BTCO)

Bitwise Bitcoin ETF (BITB)

ProShares Bitcoin Strategy ETF (BITO)

Volatility Shares 2x Bitcoin ETF (BITX)

ProShares Short Bitcoin ETF (BITI)

What Is a Bitcoin ETF?

An exchange-traded fund that focuses its investments mostly on assets associated with the original cryptocurrency, bitcoin, is known as a bitcoin ETF. ETFs employ the money they receive from the sale of shares to investors on the open market to construct an asset portfolio.

ETFs and mutual funds are comparable. However, ETFs are exchanged directly on a stock market, much like shares of a publicly listed firm, in contrast to mutual funds.

SEC restrictions prevented bitcoin ETFs from trading bitcoin at its current spot price until January 11. Instead, fund managers have to own bitcoin futures contracts or businesses and other ETFs associated with cryptocurrencies in general. Futures are sophisticated derivatives that are best left to knowledgeable traders.

Though greater direct exposure to bitcoin is now offered by “spot” bitcoin ETFs, various investors are drawn to different approaches. These might include futures or additional means of becoming exposed to the bitcoin markets. Before purchasing a bitcoin ETF, make sure you are well-informed on its structure.

What Are Spot Bitcoin ETFs?

The SEC formally approved exchange-traded funds that have a direct connection to bitcoin in January. Bitcoin ETFs referred to as “spot” funds are able to hold the digital currency with no hesitation or issues.

The new funds provide investors an opportunity to link their capital extremely closely to the daily fluctuation of bitcoin values on “spot” markets, while other funds over the last few years have offered indirect exposure.

However, not every one of the new funds will bring in enough cash from investors. That may be disastrous for a fund. Ultimately, a fund with just $50 million in total assets and yearly expenditures of 0.30% would only earn $150,000 in management fees annually. That’s not much money for a marketing budget, activities related to regulatory compliance, or other essential costs.

Grayscale Bitcoin Trust

How is it that Grayscale Bitcoin Trust has been operational since 2013 if the SEC only recently approved funds to function as spot bitcoin ETFs? When it first started off, GBTC wasn’t an ETF.

GBTC transacted similarly to a closed-end fund as a trust. It was therefore devoid of the extremely liquid and seamless redemption process that ETFs enjoy. Consequently, shares frequently fluctuated significantly in value relative to the underlying bitcoin. It makes sense that investors would be hesitant to spend, say, $1 on assets worth only 90 cents. GBTC gained parity with the other ten ETFs that obtained the SEC’s permission to operate when the SEC approved its conversion to an ETF.

Alternative Bitcoin ETFs

Recently, spot bitcoin ETFs have gained attention. However, exchange-traded funds that make indirect bitcoin investments—like holding bitcoin futures—are not less valuable. They are only distinct approaches that aim to expose people to bitcoin in different ways.

It’s important to keep an eye out for the trend where many shareholders are shifting their assets from the older funds to their more recent relatives as a result of the recent spot offerings. Funds will struggle to remain in operation if they don’t keep enough assets under management.

Bitcoin ETF Fees

In certain circumstances, owning a bitcoin ETF might be more costly than just buying bitcoin on a cryptocurrency market. This is the reason why: Buying and selling bitcoin on cryptocurrency exchanges usually carries one-time fees, while holding a bitcoin ETF entails an annual expense ratio cost. However, a few ETFs have temporarily eliminated those costs.

It’s advisable to contemplate if you want to move any bitcoin from your exchange to an independent cryptocurrency wallet, either hot or cold. If so, there will probably be a minor withdrawal cost.

Why Should I Buy a Bitcoin ETF Instead of Bitcoin?

Buying an expertly managed exchange-traded fund (ETF) rather than holding real bitcoin may make some investors feel more comfortable adding the cryptocurrency to their portfolios.

Since bitcoin is still a relatively new investment, some consumers might be worried about passwords or private keys being lost or compromised, even if their money is kept in a secure bitcoin wallet.

Not everyone feels comfortable opening a Coinbase account, despite the fact that practically anybody can. For a variety of reasons, some people might only be able to purchase and sell stocks through their traditional brokerage accounts.

A 401(k) plan or an individual retirement account (IRA) are popular options for retirement investments. Owning shares of a bitcoin ETF is a sensible substitute for creating an account at a cryptocurrency exchange or bitcoin IRA if a retired investor wants to obtain a small amount of exposure to bitcoin.

The Future of Bitcoin ETFs

The future of volatile assets such as bitcoin ETFs remains unknown. The price of a bitcoin has increased to almost $60,000 since its launch. They have since fallen below $19,000.

The question of whether cryptocurrencies in general and bitcoin in particular will be profitable long-term investments is one that each investor must answer for themselves. It is advisable to get advice from a financial counsellor prior to making any investing decisions.

Read More:- Guide: What is Bitcoin and how does it work?