Throughout 2024, the cryptocurrency ETF landscape saw significant advancements with the launch of the first spot Bitcoin (BTC) and Ether (ETH) exchange-traded funds, introduced on Jan. 11 and July 23, respectively.
“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.”
These ETFs offer investors direct exposure to the underlying cryptocurrencies, which are securely held by custodians, differing from previous cryptocurrency-linked investment products in several key ways.
Unlike the earlier closed-end funds (CEFs) and trusts, these new spot ETFs benefit from an open-ended structure. This allows for the creation and redemption of shares that helps their market price closely track the net asset value (NAV) without the premiums or discounts often seen in CEFs.
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Additionally, these ETFs provide actual exposure to spot Bitcoin and Ether, unlike derivative-based products that offer synthetic exposure based on futures prices. This means they reflect the live market prices of these cryptocurrencies during trading hours, offering more accurate exposures.
But one of the most significant advantages for investors was the simplification of cryptocurrency investment. These ETFs can be traded just like stocks on regular brokerage platforms, allowing for inclusion in diversified portfolios and tax-advantaged accounts like Roth IRAs.
This feature also eliminates the complexities and security concerns associated with self-custody and trading on cryptocurrency exchanges, some of which went bankrupt during 2022’s “crypto winter.”
However, experts note that these new cryptocurrency ETFs still have drawbacks. “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) | 0.12% |
| Grayscale Ethereum Trust (ETHE) | 2.5% |
| Cyber Hornet S&P 500 and Bitcoin 75/25 Strategy ETF (ZZZ) | 1.01% |
| ProShares Bitcoin Strategy ETF (BITO) | 0.95% |
| Roundhill Bitcoin Covered Call Strategy ETF (YBTC) | 0.95% |
| Global X Blockchain ETF (BKCH) | 0.5% |
| Global X Bitcoin Trend Strategy ETF (BTRN) | 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.” Consider the case of IBIT, which has swelled to over $21.3 billion in assets under management (AUM) thanks to the iShares brand name recognition.
This ETF holds around 357,227 Bitcoin in custody, which helps it track the CME CF Bitcoin Reference Rate — New York Variant as a benchmark. So far, iShares has done a great job keeping IBIT liquid, with a minimal 30-day median bid-ask spread of 0.03% and a minor 0.1% discount to NAV. The ETF charges a 0.25% sponsor fee, with a waiver down to 0.12% on the first $5 billion in AUM for a 12-month period.
Grayscale Ethereum Trust (ETHE)
ETHE has been around since December 2017, but until July 23, 2024, it was a closed-end trust. As a result, ETHE historically traded at either discounts or premiums to its NAV due to excessive selling or buying pressure. However, its conversion to an ETF has solved the issue. Today, ETHE remains one of the largest Ethereum ETFs, with $4.2 billion in AUM held in custody with Coinbase Global Inc. (COIN).
However, ETHE does have one significant drawback: a high 2.5% sponsor fee. To attract more buy-and-hold investors, the ETF recently completed a spin-off by distributing 10% of its assets to shareholders in the form of the Grayscale Ethereum Mini Trust (ETH). ETH currently has just over $911 million in AUM but charges a significantly lower sponsor fee compared to ETHE, at 0.15%.
Cyber Hornet S&P 500 and Bitcoin 75/25 Strategy ETF (ZZZ)
A highly aggressive strategy that growth investors can implement is by pairing equity and cryptocurrency investments. For example, combining the S&P 500 and Bitcoin can provide exposure to one of the most recognizable and top-performing stock market indexes along with the world’s largest cryptocurrency. Investors can achieve this exposure by pairing two different ETFs, or via a one-ticker solution like ZZZ.
ZZZ starts by allocating 75% of its portfolio to the stocks found in the S&P 500. The remaining 25% is invested in CME Bitcoin futures, which significantly ramps up the risk and return profile of the ETF. But to help manage volatility, ZZZ’s asset mix is rebalanced on a monthly basis. Since its inception on Dec. 28, 2023, ZZZ has returned 20.6%. The ETF charges a 1.01% net expense ratio.
[See: What’s the Best Cryptocurrency to Buy? 6 Contenders]
ProShares Bitcoin Strategy ETF (BITO)
Looking for exposure to Bitcoin but with the potential for income? The new spot Bitcoin ETFs do not currently make distributions, so they’re limited to capital appreciation. If you want yield, the cryptocurrency ETF to consider is BITO. This actively managed ETF invests in Bitcoin futures and Bitcoin index-linked swaps via a wholly owned subsidiary, both of which are collateralized by Treasury bills.
Periodically, BITO’s subsidiary entity will realize gains on its Bitcoin-linked futures and swaps. The net income from these transactions is passed on to BITO investors and characterized as dividends. BITO last paid a monthly dividend of around $1.21 per share on Sep. 10, 2024. However, investors should note that the distribution can fluctuate and is not guaranteed. BITO charges a 0.95% expense ratio.
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 of 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’s reference asset is actually BITO, but the ETF does not directly hold shares. Instead, it obtains synthetic exposure by buying a long call, and then selling a short put. Then, YBTC sells a BITO short call, which reduces its upside price appreciation potential but pays a cash premium. For similar yield-first exposure to Ethereum, Roundhill also offers the Roundhill Ether Covered Call Strategy ETF (YETH).
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 benefit from this, investors can buy BKCH.
Unlike the previous ETFs, BKCH does not hold spot cryptocurrency, futures, swaps or options. Instead, the ETF invests in crypto industry equities represented by the Solactive Blockchain Index. Investors can expect exchanges such as Coinbase, Bitcoin miners such as Hut 8 Corp. (HUT), and digital asset managers such as Galaxy Digital Holdings Ltd. (GLXY.TO). The ETF charges a 0.5% expense ratio.
Global X Bitcoin Trend Strategy ETF (BTRN)
Investors looking to mitigate some of the roller-coaster volatility associated with cryptocurrency investments might like BTRN. This ETF tracks the CoinDesk Bitcoin Trend Indicator Futures Index, which uses a trend-following algorithmic model to tactically allocate its portfolio between CME Bitcoin futures or the Global X 1-3 Month T-Bill ETF (CLIP) based on “risk on” and “risk off” signals.
The “Bitcoin Trend Indicator” used by BTRN quantifies momentum based on a series of exponential moving averages. A value of -1 indicates a significant downtrend, while a value of +1 indicates a significant uptrend. Based on the prevailing trend, BTRN can dynamically adjust its holdings to be more aggressive, favoring Bitcoin futures, or conservative, favoring T-bills.
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7 Best Cryptocurrency ETFs to Buy originally appeared on usnews.com
Update 09/18/24: This story was previously published at an earlier date and has been updated with new information.
