22 Bitcoin ETFs to Buy in 2024: Top Funds for Buying Bitcoin
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Bitcoin ETFs (Exchange-Traded Funds) have emerged as a significant financial product, offering investors a regulated and accessible way to gain exposure to Bitcoin without the complexities of direct cryptocurrency ownership. These funds are traded on traditional stock exchanges, much like stocks, and they track the price of Bitcoin, providing a simpler entry point into the world of cryptocurrency for both individual and institutional investors.
Bitcoin ETFs are a welcome entrant into the ETF market for several reasons:
- Accessibility: They make investing in Bitcoin possible through conventional brokerage accounts, eliminating the need for digital wallets and the security concerns associated with them.
- Regulatory Oversight: Being regulated products, they offer a layer of security and legitimacy that direct cryptocurrency investments do not, potentially attracting more conservative investors.
- Market Stability: By providing a more straightforward way to invest in Bitcoin, ETFs can help stabilize the market by reducing the volatility associated with sudden individual investments and withdrawals.
- Mainstream Adoption: ETFs help in bringing cryptocurrency into the mainstream investment world, similar to traditional assets like gold or stocks.
A landmark development occurred in January 2024 when the U.S. Securities and Exchange Commission (SEC) approved the first-ever batch of spot Bitcoin ETFs. This approval allows ETFs to hold actual Bitcoin rather than derivatives like futures, marking a significant step forward in the financial product's evolution. This move by the SEC is expected to enhance the liquidity and credibility of Bitcoin as an asset class, making it more attractive to a broader range of investors.
These newly approved spot Bitcoin ETFs are designed to reflect the current price of Bitcoin directly, offering investors a more accurate and immediate linkage to the actual performance of Bitcoin in the cryptocurrency market. This direct exposure is seen as a way to potentially increase returns for investors compared to futures-based Bitcoin ETFs, which may suffer from tracking errors and other issues related to the futures.
The Landscape of Bitcoin ETFs Before 2024
Before the approval of spot Bitcoin ETFs in 2024, the landscape of Bitcoin investment vehicles was quite different, primarily characterized by indirect exposure options and regulatory hesitations. Following are some examples of early Bitcoin investment vehicles:
- Bitcoin Trusts: Before the advent of Bitcoin ETFs, trusts like the Grayscale Bitcoin Trust (GBTC) were among the primary methods for investors to gain exposure to Bitcoin through traditional investment channels. These trusts allowed investors to buy shares that represent a portion of the Bitcoin held by the trust. However, these did not offer the same liquidity or price tracking accuracy as ETFs because they could trade at significant premiums or discounts to the actual price of Bitcoin.
- Bitcoin Futures ETFs: The U.S. Securities and Exchange Commission (SEC) first approved Bitcoin futures ETFs in 2021, starting with the ProShares Bitcoin Strategy ETF. These ETFs did not invest directly in Bitcoin but rather in futures contracts on Bitcoin. This was seen as a step towards more regulated Bitcoin-related investment products, although it still did not provide direct exposure to the actual cryptocurrency.
- Private Funds and Limited Partnerships: High-net-worth individuals and institutional investors had the option to invest in Bitcoin through private funds and limited partnerships that dealt directly with Bitcoin and other cryptocurrencies. These were less accessible to the general public and involved higher fees and minimum investment thresholds.
The SEC was initially reluctant to approve Bitcoin ETFs due to concerns about market manipulation, Bitcoin's volatility, and the security of asset custody. Over the years, many Bitcoin ETF applications were rejected due to concerns about the market's ability to prevent fraud and manipulation, protect investors, and the adequacy of market surveillance.
The SEC finally decided to approve Bitcoin ETFs following a federal court ruling that found the SEC had not adequately explained its reasons for previously denying an application for a Bitcoin ETF by Grayscale.
Types of Bitcoin ETF
There are two main types of Bitcoin ETFs — Spot Bitcoin ETFs and Bitcoin Strategy ETFs. Following is a short explanation of the two types of Bitcoin ETFs:
- Spot Bitcoin ETFs: These ETFs provide direct exposure to Bitcoin by holding the actual cryptocurrency. They aim to track the real-time market price of Bitcoin as closely as possible. Spot Bitcoin ETFs are designed for investors looking for direct exposure to the price movements of Bitcoin without the need to own the cryptocurrency themselves. This type of ETF involves physically holding Bitcoin and is managed by trusted custodians to reflect the current value of Bitcoin in the market.
- Bitcoin Strategy ETFs: These ETFs do not hold Bitcoin directly. Instead, they may invest in Bitcoin futures contracts, Bitcoin mining stocks, or other financial instruments related to Bitcoin. Bitcoin Strategy ETFs aim to track the price of Bitcoin indirectly and can include investments in assets that are expected to move in correlation with Bitcoin's price. This category can also encompass ETFs that use various strategies, such as leveraging or employing sophisticated trading techniques, to capitalize on Bitcoin's price movements. These ETFs are typically more suitable for sophisticated investors who understand the complexities of futures contracts and the indirect nature of the investment.
Top 11 spot Bitcoin ETFs listed in US
In January 2024, the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs, marking a significant milestone in the integration of cryptocurrency into mainstream financial markets. These ETFs allow investors to gain direct exposure to Bitcoin's price movements without the complexities of managing digital wallets and private keys. This development not only simplifies Bitcoin investment but also enhances its legitimacy and accessibility, potentially attracting a broader base of institutional and retail investors. The following are the approved ETFs:
| ETF Name | Fee (Expense Ratio) | Fee Waiver Details |
|---|---|---|
| Bitwise Bitcoin ETF (BITB) | 0.20% | 0% fees for first 6 months or $1 billion in assets |
| ARK 21Shares Bitcoin ETF (ARKB) | 0.21% | 0% fees for first 6 months or $1 billion in assets |
| Fidelity Wise Origin Bitcoin Fund (FBTC) | 0.25% | Fees waived until July 31, 2024 |
| iShares Bitcoin Trust (IBIT) | 0.25% | 0.12% fee for 12 months or until $5 billion in assets |
| Valkyrie Bitcoin Fund (BRRR) | 0.25% | 0% fee for first three months |
| VanEck Bitcoin Trust (HODL) | 0.20% | No current waiver, but fee reductions previously |
| Franklin Bitcoin ETF (EZBC) | 0.19% | 0% fee until August 2, 2024 or until $10 billion in assets |
| WisdomTree Bitcoin Fund (BTCW) | 0.25% | 0% fee for six months or the first $1 billion in assets |
| Invesco Galaxy Bitcoin ETF (BTCO) | 0.25% | 0% fee for six months or until $5 billion in assets |
| Grayscale Bitcoin Trust (GBTC) | 1.50% | No fee waiver |
| Hashdex Bitcoin ETF (DEFI) | 0.90% | No fee waiver |
Top 3 spot Bitcoin ETFs listed in HK
The Hong Kong Stock Exchange (HKEX) has made a significant move by approving the first batch of spot Bitcoin and Ether ETFs in April 2024, marking a milestone in the region's financial landscape. This development provides a regulated pathway for digital assets, fostering mainstream adoption of cryptocurrencies within a secure framework. The approval has generated considerable interest from institutional and retail investors. The following are the approved ETFs
| ETF Name | Fee (Expense Ratio) | Fee Waiver Details |
|---|---|---|
| ChinaAMC Bitcoin ETF (3042) | 0.99% | No fee waiver |
| Harvest Bitcoin Spot ETF (3439) | 1.0% | No fee waiver |
| Bosera HashKey Bitcoin ETF (3008) | 0.6% | No fee waiver |
Top 8 Bitcoin Strategy ETFs listed in US
In 2024, the landscape of Bitcoin investment was significantly enriched by the introduction of various Bitcoin Strategy ETFs. These ETFs offer investors sophisticated strategies that do not directly hold Bitcoin but instead engage in operations such as futures contracts, options, or equity in companies related to Bitcoin technology and mining.
Following are the 8 Bitcoin Strategy approved ETFs:
| ETF Name | Fees (with Fee Waiver/Reduction) | Investment Approach |
|---|---|---|
| Bitwise Bitcoin and Ether Equal Weight Strategy ETF (BTOP) | 0.95% (Reduced to 0.85% until Oct. 2, 2025) | Invested in Bitcoin futures |
| Valkyrie Bitcoin and Ether Strategy ETF (BTF) | 1.24% | Invested in Bitcoin and Ether futures |
| ProShares Bitcoin & Ether Market Cap Weight Strategy ETF (BETH) | 1.33% (Reduced to 0.95% until Oct. 31, 2024) | Invested in Bitcoin and Ether futures |
| ProShares Bitcoin Strategy ETF (BITO) | 0.95% | Invested in Bitcoin futures |
| ProShares Short Bitcoin ETF (BITI) | 1.33% | Best for Daily Profit Opportunities |
| Bitwise Crypto Industry Innovators ETF (BITQ) | 0.85% | Cheapest ETF option |
| Valkyrie Bitcoin Strategy ETF (BTF) | 1.24% | Best Actively Managed Bitcoin ETF |
| Simplify U.S. Equity PLUS GBTC ETF (SPBC) | 0.72% | Best Bitcoin ETF for U.S.-based companies |
Bitcoin ETF Market Impact and Investor Sentiment
The introduction of spot Bitcoin ETFs has significantly impacted the market and investor behavior in several key ways:
Market Impact
1. Increased Accessibility and Liquidity: Spot Bitcoin ETFs have made Bitcoin more accessible to a broader range of investors, including those who may have been hesitant to engage directly with cryptocurrencies due to the complexities of managing digital wallets and security concerns. This increased accessibility has contributed to higher liquidity in the Bitcoin market, facilitating easier and more frequent transactions.
2. Price Impact: The approval and launch of spot Bitcoin ETFs have been associated with positive price movements in Bitcoin. This is attributed to the increased demand from both retail and institutional investors, as these ETFs allow for easier entry into the Bitcoin market.
3. Market Stability: By providing a regulated and structured way for investors to gain exposure to Bitcoin, spot Bitcoin ETFs can contribute to greater market stability. They help mitigate the price volatility typically associated with less regulated investment avenues.
Investor Behavior
1. Shift in Investor Demographics: Spot Bitcoin ETFs have attracted a new segment of investors, particularly institutional investors and those from traditional finance sectors who may have been previously cautious about investing directly in cryptocurrencies.
2. Enhanced Confidence: The regulatory approval of spot Bitcoin ETFs has enhanced investor confidence in Bitcoin as a legitimate asset class. This is because ETFs are familiar and widely used investment structures that are subject to stringent regulatory oversight.
3. Diversification Strategies: Investors are increasingly considering Bitcoin as a part of diversified investment portfolios, akin to how commodities like gold are used. Spot Bitcoin ETFs facilitate this by allowing investors to gain exposure to Bitcoin's price movements without the need to own the cryptocurrency directly, thus integrating Bitcoin into traditional investment portfolios.
4. Speculative Dynamics: While spot Bitcoin ETFs provide many benefits, they also introduce new speculative dynamics into the market. Investors might engage in speculative trading behaviors, influenced by the ease of trading ETF shares compared to buying and securing Bitcoin directly.
Bitcoin ETF Investment Considerations
When considering an investment in Bitcoin ETFs, it is essential to evaluate fees, performance metrics, and custodianship risks. These ETFs offer a regulated way to invest in Bitcoin, providing both spot and strategy-based options. However, investors must assess management fees, which can impact returns, and understand the performance trends of these ETFs in relation to Bitcoin's price. Custodianship, particularly the security measures and reliability of custodians like Coinbase, is crucial due to the risks of theft and fraud.
The importance of custodians in the context of spot Bitcoin ETFs revolves around their critical role in ensuring the security and integrity of the ETFs' Bitcoin holdings. Custodians are responsible for the safekeeping of the actual Bitcoin assets on which these ETFs are based. This role is paramount because, unlike traditional assets, Bitcoin and other cryptocurrencies are digital and bear unique security challenges, including vulnerability to hacking and theft.
Security aspects to consider in the role of custodians include:
- Robust Security Measures: Custodians must employ advanced security protocols to protect the digital assets under their care. This includes the use of cold storage solutions, where the assets are kept in wallets not connected to the internet, thereby reducing the risk of online hacking attempts.
- Regulatory Compliance: A reputable custodian should be in compliance with relevant regulations and standards. This ensures that they are operating within the legal framework and adhering to best practices in asset security and management.
- Operational Integrity: The operational practices of the custodian, including how they handle asset transfers, execute transactions, and manage recovery processes in case of a security breach, are crucial.
- Insurance and Assurance: Given the potential for loss, whether through cyber-attacks or operational failures, custodians often provide insurance coverage for the assets they hold.
- Transparency and Reporting: Custodians should offer transparency in their operations, providing regular reports and audits of the assets under their care.
Where to Buy These Bitcoin ETFs
In Hong Kong, investors looking to purchase Bitcoin ETFs can do so through licensed brokerage platforms that are regulated by the Hong Kong Securities and Futures Commission (SFC). US-listed Bitcoin ETFs can only be purchased by Professional Investors (PI) while HK-listed digital asset ETFs are open to both retail and professional investors.
Navigating the Investment Landscape of Bitcoin ETFs
Investing in Bitcoin ETFs offers a way to access Bitcoin's potential returns within a regulated framework, providing benefits like easier access and integration into diversified portfolios. However, these investments come with risks, including Bitcoin's price volatility and regulatory uncertainties. Given the fast-changing nature of cryptocurrency markets and regulations, investors should thoroughly research and consider their financial objectives and risk appetite before investing in Bitcoin ETFs. Consulting with financial advisors for a deeper understanding of these ETFs in relation to one's investment strategy is also advisable.
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