The U.S. exchange-traded fund, or ETF, industry underwent a significant transformation on Jan. 10, marking a pivotal day for cryptocurrency investors.
On that day, the SEC approved the launch of 11 new spot Bitcoin (BTC) ETFs. These ETFs differ from their predecessors by holding Bitcoin directly as their underlying assets, instead of relying on futures contracts.
This direct approach allows for a cash-only creation process, wherein investors purchase shares of the ETF, and in response, the ETF acquires an equivalent value of Bitcoin, ensuring that the investment is backed by physical Bitcoin holdings.
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This innovation has greatly simplified cryptocurrency investment for the average investor, eliminating the need for self-custody of digital assets or the use of a cryptocurrency exchange. Now, investors can gain exposure to Bitcoin through a familiar stock-like instrument tradable within most brokerage accounts.
“Crypto ETFs are essentially funds that track the price of a select individual cryptocurrency or even a group of cryptocurrencies,” says Brandon Zemp, CEO of BlockHash. “They are generally low-cost, more diversified and require no real need to understand how crypto self-custody works, making them a simpler way of gaining exposure to the crypto market.”
The adoption rate of these ETFs has been astonishing; for example, the iShares Bitcoin Trust (ticker: IBIT) has already amassed over $10 billion in assets under management, or AUM, since its debut. With Bitcoin’s price at approximately $46,000 on the approval day and soaring to a new all-time high above $70,000 on Mar. 8, the growth and interest in these ETFs are evident.
Now, the SEC is mulling over the prospectuses filed by several asset managers for spot exposure to Ethereum (ETH), the second-largest cryptocurrency by market capitalization and the one most widely used in a variety of decentralized finance applications.
Beyond IBIT, here are seven other notable cryptocurrency ETFs that investors should consider for diversifying their portfolios:
| ETF | Expense ratio |
| Bitwise Bitcoin ETF (BITB) | 0% |
| Grayscale Bitcoin Trust ETF (GBTC) | 1.5% |
| Fidelity Wise Origin Bitcoin Fund (FBTC) | 0% |
| ProShares Ether Strategy ETF (EETH) | 0.95% |
| ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) | 0.95% |
| Global X Blockchain ETF (BKCH) | 0.5% |
| Global X Blockchain & Bitcoin Strategy ETF (BITS) | 0.65% |
Bitwise Bitcoin ETF (BITB)
BITB made headlines in January for electing to publish the public Bitcoin address of its holdings, allowing for a high degree of transparency when it came to the ETF’s reserves. This allows prospective investors to verify the ETF’s holdings and even donate Bitcoin if they wish to do so. But beyond the transparency, BITB’s value proposition also comes from a net 0% expense ratio.
The ETF would normally charge 0.2%, but Bitwise is waiving the entirety of the fee for a six-month period on the first billion in AUM. This ETF has seen great trading volume, with over 4.5 million shares exchanging hands on a daily basis. As of Mar. 7, BITB holds a total of 27,751.58 Bitcoin in custody, which amounts to roughly 0.000545 Bitcoin per share.
Grayscale Bitcoin Trust ETF (GBTC)
Even after steady outflows after the launch of the 10 other Bitcoin ETFs, GBTC still reigns supreme with just over $27 billion in AUM. This ETF originally started as a closed-end fund, and Grayscale’s legal battle with the SEC concerning its conversion provided much of the groundwork that paved the way for the debut of spot Bitcoin ETFs. Now in ETF form, GBTC still ranks as the largest Bitcoin ETF.
However, the net outflows by investors point to a lasting concern with GBTC — high fees. Despite its first-mover advantage and economy of scale, GBTC’s expense ratio sits at a high 1.5%. Given that other ETFs are charging lower fees or waiving them entirely, investors have elected to sell GBTC and pursue cheaper alternatives. Only time will tell if GBTC remains at the top in terms of sheer size.
Fidelity Wise Origin Bitcoin Fund (FBTC)
Not all institutional asset managers and brokerages were receptive to the debut of spot Bitcoin ETFs. An outlier was low-cost fund provider Vanguard, which announced that it would not be creating a Vanguard-branded Bitcoin ETF, nor offering any Bitcoin ETFs from other issuers on its brokerage platform. This announcement irked crypto investors, some of whom called for a boycott of Vanguard.
However, one of Vanguard’s main competitors, Fidelity Investments, had no such issues, launching its own Bitcoin ETF in the form of FBTC. This ETF can be easily purchased and sold on Fidelity’s brokerage platform and is currently waiving a 0.25% expense ratio down to 0%. It’s been fairly popular since its debut, attracting around $6.4 billion in AUM.
ProShares Ether Strategy ETF (EETH)
While the SEC continues to scrutinize the spot Ethereum ETF filings, investors can make do with Ethereum “strategy” ETFs like EETH. These ETFs provide a proxy for Ether exposure via a portfolio of Treasury bills, which act as collateral for CME Ether futures. These derivatives essentially bet on the “future” price of Ether as opposed to the current, or “spot” price.
However, it’s important to note that these ETFs do not hold any underlying Ether. They gain exposure via derivatives, and as such, a degree of tracking error is to be expected. This refers to the potential difference between EETH’s returns and the spot Ether price. In addition, EETH also faces a greater amount of drag from a high 0.95% net expense ratio.
[READ: Bitcoin vs. Ethereum: Which Is the Better Buy?]
ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH)
As of March 8, Bitcoin has a market capitalization of $1.3 trillion, whereas Ethereum sits at around $473 billion. In other words, Bitcoin is around three times as large on a relative basis. This can be seen in the portfolio of BETH, which allocates based on the market capitalization of each. Right now, the ETF is around 75% Bitcoin and 25% Ether, reflecting the larger size of the former.
However, this exposure is synthetic. Like EETH, BETH obtains its exposure via CME Bitcoin and CME Ether futures collateralized by Treasury bills. Therefore, it does not hold any Bitcoin or Ether in physical storage. However, at this time it remains one of the few ETFs to offer multi-asset cryptocurrency exposure. It charges a 0.95% net expense ratio, waived down from 1.33%.
Global X Blockchain ETF (BKCH)
“Despite the blockchain theme slightly underperforming the broader market thus far in 2024, certain companies, especially select Bitcoin miners and cryptocurrency exchanges, have significantly outperformed, resulting in the overall themes’ notable outperformance in February,” says Ido Caspi, research analyst at Global X ETFs. For exposure, Global X ETFs offers BKCH.
This ETF tracks the Solactive Blockchain Index, which holds companies like Coinbase Global Inc. (COIN), Riot Platforms Inc. (RIOT) and Galaxy Digital Holdings Ltd. (GLXY.TO) for a 0.5% expense ratio. “As observed in 2023, blockchain and crypto-related stocks, such as miners and crypto exchanges, typically offer higher beta trades ahead of major events,” Caspi says. “We anticipate a similar pattern to occur as we approach the upcoming Bitcoin halving expected in April.”
Global X Blockchain & Bitcoin Strategy ETF (BITS)
“The influx of institutional capital into Bitcoin is expected to significantly increase Bitcoin activity and, consequently, transaction fees,” Caspi says. “This surge in activity bodes well for miners who have a substantial global hash share, as they essentially stand to earn more Bitcoin each month for their role in validating blocks.” Therefore, mining and exchange stocks could be a viable bet on Bitcoin prices.
Investors looking for hybrid exposure to cryptocurrency industry stocks as well as Bitcoin can use BITS. This ETF combines a roughly 50% holding in BKCH with another 50% in CME Bitcoin futures. “Early 2024 data shows that transactions on the blockchain are up roughly two times compared to early 2023,” Caspi says. “This increase in Bitcoin earned will likely lead to a substantial rise in revenues, particularly if the price of Bitcoin continues on an upward trajectory.”
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7 Best Cryptocurrency ETFs to Buy originally appeared on usnews.com
Update 03/08/24: This story was previously published at an earlier date and has been updated with new information.
