The launch of spot Bitcoin exchange-traded funds (ETFs) in January opened the floodgates for a slew of prospective new products. These cryptocurrency ETFs built upon the foundations established by earlier Bitcoin-futures-based ETFs and closed-end funds holding spot Bitcoin.
“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 evolution of cryptocurrency ETFs didn’t end with spot Bitcoin ETFs, though. In May, the SEC approved applications for spot Ethereum ETFs. With the actual launch date of these spot Ethereum ETFs still up in the air, the ETF industry is already moving on to the next big thing: a spot Solana ETF.
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This was kicked off by a duo of filings in June from asset managers VanEck and 21Shares in the U.S., which are now undergoing regulatory review. The recent events make the intersection of crypto and ETFs a highly watched area, and investors have no shortage of options for exposure.
“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.”
Choosing a cryptocurrency ETF allows investors to bypass the complexities of self-custody and cryptocurrency exchanges. Essentially, with these ETFs you can now trade Bitcoin as you would a regular stock on a brokerage app, and even hold the ETFs in a tax-advantaged account like a Roth IRA.
That being said, experts point out that there are still some disadvantages. “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.”
Here are seven of the best cryptocurrency ETFs to buy today:
| ETF | Expense ratio |
| iShares Bitcoin Trust (ticker: IBIT) | 0.25% |
| ProShares Bitcoin Strategy ETF (BITO) | 0.95% |
| Roundhill Bitcoin Covered Call Strategy ETF (YBTC) | 0.95% |
| Global X Blockchain ETF (BKCH) | 0.50% |
| VanEck Ethereum Strategy ETF (EFUT) | 0.66% |
| ProShares UltraShort Bitcoin ETF (SBIT) | 0.95% |
| ProShares Ultra Bitcoin ETF (BITU) | 0.95% |
iShares Bitcoin Trust (IBIT)
“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.” Case in point, the BlackRock-backed IBIT has soared to just over $17.3 billion in assets under management, or AUM.
This spot Bitcoin ETF tracks the CME CF Bitcoin Reference Rate — New York Variant by holding Bitcoin in secure custody. So far, iShares has done an excellent job ensuring ample liquidity, with IBIT recording a low 0.03% 30-day bid-ask spread. The sponsor fee for this ETF is 0.25%, but IBIT is currently waiving it down to 0.12% on the first $5 billion in AUM for a 12-month period starting from its inception date.
ProShares Bitcoin Strategy ETF (BITO)
BITO was the first U.S.-listed, Bitcoin-linked ETF. Although the ETF did not hold spot Bitcoin, it provided a high correlation to Bitcoin prices by holding derivatives known as Bitcoin futures. These are traded on the Chicago Mercantile Exchange (CME) and can be used by investors to speculate on Bitcoin prices or manage risk by hedging. In effect, the use of these futures provides synthetic Bitcoin exposure.
Unlike the spot Bitcoin ETFs, BITO’s portfolio is actively managed. That is, the ETF is constantly buying and selling CME Bitcoin futures contracts, called “rolling.” Any gains realized by rolling these futures contracts are periodically distributed each month as dividend income. For example, BITO last paid a distribution of around $1.77 per share on June 10, making it a good way to get income.
Roundhill Bitcoin Covered Call Strategy ETF (YBTC)
“YBTC offers the potential for high income, as it generates monthly income through a covered call strategy on Bitcoin,” says Dave Mazza, CEO at Roundhill Investments. “This ETF provides upside exposure to Bitcoin subject to a cap, offering a unique blend of income generation and Bitcoin exposure without the complexities of direct Bitcoin investment or the hassle of trading options directly.”
YBTC starts by combining a long call option and a short put option on BITO, which provides the fund with synthetic long exposure to BITO’s price returns while not requiring the ETF to actually hold any shares. Then, to generate income, the fund sells a covered call on BITO, which caps upside appreciation and delivers monthly cash premiums. Currently, YBTC is paying a 24.3% distribution rate.
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. “The influx of institutional capital into Bitcoin is expected to significantly increase Bitcoin activity and, consequently, transaction fees.” To focus on crypto stocks, Global X offers BKCH.
Unlike the previous ETFs, BKCH does not hold spot Bitcoin or Bitcoin futures. Instead, investors can expect a portfolio of 25 crypto industry stocks such as Coinbase Global Inc. (COIN), Riot Platforms Inc. (RIOT), Marathon Digital Holdings Inc. (MARA), Hut 8 Corp. (HUT.TO), Bitfarms Ltd. (BITF.TO) and Galaxy Digital Holdings Ltd. (GLXY.TO) via the Solactive Blockchain Index. The ETF charges a 0.5% expense ratio.
[See: What’s the Best Cryptocurrency to Buy? 6 Contenders]
VanEck Ethereum Strategy ETF (EFUT)
Spot Ethereum ETF applications may have been approved by the SEC, but they have yet to debut. Currently, issuers are undergoing the final stages of the regulatory process, which largely consists of amending offering documents to resolve any outstanding issues. Until these spot Ethereum ETFs are officially launched and trading on exchanges, ETF investors can still use Ethereum futures ETFs like EFUT for exposure.
EFUT’s strategy is fairly simple. The ETF holds a portfolio of Treasury bills, which are then leveraged as collateral for exposure to CME Ether futures contracts. The ETF itself is structured as a C-corporation to provide greater tax efficiency. Investors can currently expect a modest 2.7% 30-day SEC yield and a 0.66% expense ratio. However, the ETF is somewhat small, with just $26 million in AUM.
ProShares UltraShort Bitcoin ETF (SBIT)
If you want to bet against Bitcoin, perhaps anticipating the end of the current bull market, there are a few ways to do so. For instance, you could directly sell Bitcoin short on a cryptocurrency exchange. You can also short a spot Bitcoin ETF like IBIT. Or, if available, you could buy a put option on a Bitcoin futures ETF like BITO. But the easiest way may be to buy an inverse Bitcoin ETF like SBIT.
This ETF attempts to deliver a daily return two times the inverse of the Bloomberg Bitcoin Index. It achieves this exposure by using both CME Bitcoin futures and swaps with large financial institutions with IBIT as the underlying holding. However, investors should note that the inverse target of this ETF is only intended to be accurate for a single day, and longer holding periods can deliver unexpected results.
ProShares Ultra Bitcoin ETF (BITU)
On the other hand, if you believe that Bitcoin’s bullish trajectory will continue thanks to the Ethereum ETF approvals and Solana ETF filings, a leveraged long Bitcoin ETF like BITU could work. Similar to its inverse counterpart SBIT, BITU uses both CME Bitcoin futures and swaps on IBIT to achieve a daily two-times return benchmarked to the Bloomberg Bitcoin Index.
The main benefit of using a leveraged ETF like BITU is the absence of margin calls. Unlike borrowing money to lever up, your maximum loss here is capped to the number of shares you purchased. However, this ETF is extremely volatile, given that it magnifies the already erratic daily price movements of Bitcoin. In addition, beware of the risks of long-term holding due to the unpredictable compounding.
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7 Best Cryptocurrency ETFs to Buy originally appeared on usnews.com
Update 07/08/24: This story was previously published at an earlier date and has been updated with new information.
