The high-profile collapses of FTX, Celsius and Voyager have vividly highlighted a well-known adage in the cryptocurrency community: “not your keys, not your coins.”
This phrase underscores the risks associated with not holding your own private keys and, by extension, not having full control over your crypto assets. This concern harks back to Bitcoin’s libertarian and decentralized roots, emphasizing the importance of self-custody.
However, the sentiment on self-custody began to shift significantly with the launch of new spot Bitcoin exchange-traded funds, or ETFs, on Jan. 10.
[Sign up for stock news with our Invested newsletter.]
“Looking back at 2016, there was only one option to directly hold Bitcoin within your retirement account,” says Chris Kline, chief operating officer and co-founder of Bitcoin IRA. “Now, there are routes to hold crypto assets in nearly every type of financial account, and the market is better for it. It means previously untapped capital now has access to Bitcoin.”
These ETFs have attracted significant investor interest. This trend indicates a growing comfort among investors with using ETFs to gain exposure to cryptocurrencies, bridging the gap between conventional investment vehicles and the digital asset space.
“More options are good for investors, and the spot Bitcoin ETFs are a welcome addition to the market,” Kline says. “The massive inflow numbers these investments have shown this year reinforce that their convenience is helping drive wide-scale adoption.”
Moreover, the focus in the crypto ETF space is rapidly expanding beyond just Bitcoin. Following the launch and success of Bitcoin ETFs, the industry’s attention is now turning toward anticipated spot Ethereum ETFs. The Securities and Exchange Commission (SEC) is expected to decide on these ETFs in May, with expectations leaning toward a potential delay or denial.
Still, the new spot Bitcoin ETFs are not a perfect replacement for owning Bitcoin directly. “ETFs are limited to traditional trading hours, while direct access platforms allow unrestricted trading,” Kline says. “Additionally, when it becomes time to take these assets out for retirement, ETFs must be sold to dollars and distributed, while a direct access platform allows for more flexibility and the ability to distribute those assets from an IRA account to a personal wallet.”
Here are seven of the best cryptocurrency ETFs to buy today:
| ETF | Expense ratio |
| iShares Bitcoin Trust (ticker: IBIT) | 0.25% |
| Bitwise Bitcoin ETF (BITB) | 0.20% |
| Grayscale Bitcoin Trust ETF (GBTC) | 1.50% |
| VanEck Ethereum Strategy ETF (EFUT) | 0.66% |
| Global X Blockchain ETF (BKCH) | 0.50% |
| Amplify Transformational Data Sharing ETF (BLOK) | 0.76% |
| ProShares Ultra Bitcoin ETF (BITU) | 0.95% |
iShares Bitcoin Trust (IBIT)
“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.”
A great example is spot Bitcoin ETF IBIT. Thanks to BlackRock’s reputation and economy of scale, IBIT has grown to over $17.2 billion in assets under management, or AUM, since its debut. It currently offers exposure to Bitcoin’s spot price during market hours for a 0.25% expense ratio, which is being waived to 0.12% on the first $5 billion of AUM for a 12-month period.
Bitwise Bitcoin ETF (BITB)
BlackRock is an example of a traditional “big box” asset manager entering the cryptocurrency industry. Dedicated digital asset managers have also made great strides in the spot Bitcoin ETF race. A great example is Bitwise, which operates BITB. This ETF made history in January for being the first Bitcoin ETF to disclose its public wallet address.
By doing so, prospective investors can verify BITB’s reserves and transactions, allowing for greater transparency. So far, this ETF has been fairly successful, attracting just over $2.1 billion in AUM representing 33,997 Bitcoins in trust. With a 30-day median bid-ask spread of 0.05%, it has also been very liquid to trade. BITB charges a 0.2% expense ratio, with the fee waived on the first $1 billion in AUM.
Grayscale Bitcoin Trust ETF (GBTC)
Bitcoin ETF investors have Grayscale to thank for making these products possible. Back in August, Grayscale won a landmark legal victory against the SEC that paved the way for the 11 spot Bitcoin ETFs you can buy today. Its longstanding fund, GBTC, was converted from a closed-end trust to an open-ended ETF as a result.
After its launch, however, GBTC saw steady outflows of capital as investors sold it to buy into competitors that were undercutting its high 1.5% expense ratio with aggressive fee waivers. Today, it sits at around $19 billion in AUM. In response, Grayscale plans to launch the Grayscale Bitcoin Mini Trust (BTC) as a spin-off of GBTC, featuring lower fees and the same spot exposure to Bitcoin.
VanEck Ethereum Strategy ETF (EFUT)
Spot Ethereum ETFs are unavailable, but investors interested in tracking the second largest cryptocurrency by market capitalization still have some unique ETFs at their disposal. The current workaround is an Ethereum “strategy” ETF that uses Ether futures. These derivatives provide synthetic exposure to Ether’s price but are not equivalent to spot Ether.
One of the notable ETFs launched in this space is EFUT from VanEck. Currently, this ETF’s holdings largely consist of risk-free Treasury bills used as collateral for CME Ether futures contracts. The price of this ETF won’t track the Ether spot price perfectly, but it is correlated closely enough to serve as a viable proxy. EFUT charges a 0.66% expense ratio and has around $29 million in AUM.
Global X Blockchain ETF (BKCH)
“As observed in 2023, blockchain and crypto-related stocks, such as miners and crypto exchanges, typically offer higher beta trades ahead of major events,” says Ido Caspi, research analyst at Global X ETFs. These companies offer an alternative way to invest in crypto, similar to how investors can target gold miners and gold streaming companies in lieu of physical bullion.
For exposure to crypto exchanges, miners and asset managers such as Coinbase Global Inc. (COIN), Riot Platforms Inc. (RIOT) and Galaxy Digital Holdings Ltd. (GLXY.TO), Global X ETFs offers BKCH at a 0.5% expense ratio. “The influx of institutional capital into Bitcoin is expected to significantly increase Bitcoin activity and, consequently, transaction fees,” Caspi says.
Amplify Transformational Data Sharing ETF (BLOK)
Another way to access the companies involved in the cryptocurrency ecosystem is with BLOK, which dates back to January 2018. This ETF currently holds 52 stocks actively selected for their involvement in blockchain technology. It shares many of the same holdings as BKCH — such as Galaxy and Coinbase — but unlike the former, it is not bound to a benchmark index.
Other notable holdings in BLOK include MicroStrategy Inc. (MSTR), which has been steadily accumulating Bitcoin under the direction of its executive chairman and president, Michael Saylor. Even traditional brokers and payment processors like Robinhood Markets Inc. (HOOD) and PayPal Holdings Inc. (PYPL) that are expanding to offer crypto services are included. BLOK charges a 0.76% expense ratio.
ProShares Ultra Bitcoin ETF (BITU)
Bitcoin is already infamous for its high volatility, with intraday swings of 5% or more up or down a common occurrence. But for traders seeking even more magnified exposure, there’s now an ETF alternative to using margin or futures. Meet BITU, a leveraged Bitcoin ETF that targets a daily return two times that of the Bloomberg Bitcoin Index for a 0.95% expense ratio.
To achieve this leveraged exposure, BITU uses a special type of derivative called a swap, which is essentially a financial contract with a counter-party — in this case, Nomura Holdings Inc. (NMR) and Goldman Sachs Group Inc. (GS). The underlying asset for the swap is another ETF: IBIT. However, prospective investors should note that this ETF is highly risky and not suitable as a long-term buy and hold.
[What the Bitcoin Halving Event Could Mean for Crypto Markets]
More from U.S. News
11 New Spot Bitcoin ETFs to Buy in 2024
Bitcoin vs. Ethereum: Which Is the Better Buy?
7 Best Cryptocurrency Stocks to Buy
7 Best Cryptocurrency ETFs to Buy originally appeared on usnews.com
Update 04/30/24: This story was previously published at an earlier date and has been updated with new information.
