Bitcoin, the pioneer of the cryptocurrency world, has seen tremendous growth in the past decade. Its widespread adoption, combined with increasing institutional interest, has driven the demand for investment vehicles that allow exposure to this digital asset.
Bitcoin Exchange-Traded Funds (ETFs) emerged as one such popular vehicle, providing investors a regulated and more accessible way to invest in Bitcoin. This article will explore what Bitcoin ETFs are, their advantages and disadvantages, and some popular examples of Spot, Futures and other Bitcoin ETFs available in the market.
- Discusses Bitcoin ETFs, which are investment funds that track the performance of Bitcoin, providing investors exposure to the digital asset without directly owning it.
- List of Bitcoin ETFs
- Advantages of Bitcoin ETFs, including simplified investment processes, enhanced liquidity, diversification, and regulatory oversight, as well as their disadvantages.
- Step-by-step guide on how to invest in Bitcoin ETFs and highlights some popular Bitcoin ETFs available in the market
- The current state of Bitcoin ETFs in the United States.
What are Bitcoin ETFs?
A Bitcoin ETF is an investment fund that seeks to track the performance of Bitcoin by holding either the digital asset itself or investing in Bitcoin-related financial instruments like futures contracts.
These ETFs are traded on major stock exchanges, allowing investors to buy and sell shares representing a portion of the fund’s Bitcoin holdings.
By investing in a Bitcoin ETF, investors can gain exposure to the price of Bitcoin without directly owning or managing the cryptocurrency.
Popular Bitcoin ETFs
Purpose Bitcoin ETF (BTCC): Launched in February 2021, it was the world’s first Bitcoin ETF. It seeks to replicate the performance of the price of Bitcoin, minus fees and expenses, and is listed on the Toronto Stock Exchange (TSX).
Grayscale Bitcoin Trust (GBTC): Although not technically an ETF, GBTC is an investment product that provides exposure to Bitcoin through a traditional investment vehicle. It is a closed-end fund listed on the OTC exchange.
ProShares Bitcoin Strategy ETF (BITO): This US-based actively managed ETF provides exposure to Bitcoin by investing in Bitcoin futures contracts. It seeks to achieve its investment objective by investing in Bitcoin futures contracts, pooled investment vehicles, and exchange-traded products that provide exposure to Bitcoin.
Evolve Bitcoin ETF (EBIT): Another Bitcoin ETF listed on the Toronto Stock Exchange (TSX), which aims to provide investors with exposure to the daily price movements of Bitcoin in U.S. dollars.
Updated List of Bitcoin ETFs:
|Fund Name||Ticker Symbol||Traded Exchange||Country||Bitcoin Holdings|
|Grayscale Bitcoin Trust||GBTC||OTC||Global||Physical Btc|
|Purpose Bitcoin ETF||BTCC||TSX||Canada||Physical Btc|
|Evolve Bitcoin ETF||EBIT||TSX||Canada||Physical Btc|
|3iQ CoinShares Bitcoin ETF||BTCQ||TSX||Canada||Physical Btc|
|Purpose Bitcoin Yield ETF||BTCY||TSX||Canada||Covered call|
|ProShares Bitcoin Strategy ETF||BITO||NYSE||USA||Btc Futures|
|Valkyrie Bitcoin Futures Strategy ETF||BTF||Nasdaq||USA||Btc Futures|
Grayscale Bitcoin Trust (GBTC) – OTC – Global
Purpose Bitcoin ETF (BTCC) – TSX – Canada
Evolve Bitcoin ETF (EBIT) – TSX – Canada
3iQ CoinShares Bitcoin ETF (BTCQ) – TSX – Canada
Purpose Bitcoin Yield ETF (BTCY) – TSX – Canada
ProShares Bitcoin Strategy ETF (BITO) – NYSE – USA – BTC Futures
Valkyrie Bitcoin Futures Strategy ETF (BTF) – Nasdaq – USA – BTC Futures
|Fees per stock trade||$0.00, Wealthsimple Trade review|
|Tradeable assets||Common stocks and ETFs|
|Trading platforms||IOS & Andriod App|
|Available exchanges||TSX, TSXV, NASDAQ|
Advantages of Bitcoin ETFs
Simplified investment process: Bitcoin ETFs allow investors to gain exposure to the price of Bitcoin without needing to create a digital wallet, manage private keys, or navigate the complexities of the cryptocurrency ecosystem.
Enhanced liquidity: ETFs are traded on major stock exchanges, providing better liquidity than direct investments in cryptocurrencies, which can sometimes be illiquid and subject to high volatility.
Diversification: Bitcoin ETFs offer investors an opportunity to diversify their portfolio by adding a digital asset class that may not be correlated with traditional asset classes like stocks and bonds.
Regulatory oversight: ETFs are subject to regulatory oversight, which can offer investors a sense of security and trust. This oversight can also minimize the risk of fraud and market manipulation that may be more prevalent in unregulated cryptocurrency markets.
Disadvantages of Bitcoin ETFs
Fees and expenses: Bitcoin ETFs charge management fees and other expenses that can reduce the potential returns on investment compared to holding Bitcoin directly.
Tracking error: ETFs may not always perfectly track the price of Bitcoin, leading to discrepancies between the fund’s performance and the actual price of the underlying asset.
Limited availability: At the time of this writing, there were only a few Bitcoin ETFs available, and they were primarily listed on the Toronto Stock Exchange. However, the landscape may change as new ETFs are approved and launched.
Best Traded Bitcoin ETF 2023
|Fund Name||Grayscale Bitcoin Trust|
|Holding Type||Physical BTC|
|Fund Name||Purpose Bitcoin ETF|
|Holding Type||Physical BTC|
|Fund Name||Bitcoin Strategy ETF|
|Holding Type||BTC Futures|
How To Invest In Bitcoin ETF's
Investing in Bitcoin ETFs can be a relatively simple process, especially for those who already have experience with traditional stock trading. Here is a detailed step-by-step guide on how to invest in Bitcoin ETFs:
Research: Before investing in any financial product, it’s essential to conduct thorough research. Start by understanding what Bitcoin ETFs are, their advantages and disadvantages, and the different options available in the market. Evaluate their past performance, management fees, and other relevant factors that may impact your investment. Keep in mind that past performance is not a guarantee of future results.
Open a brokerage account: To trade Bitcoin ETFs listed on major stock exchanges, you’ll need a brokerage account. If you don’t already have one, research different brokerages to find one that best suits your needs, considering factors such as trading fees, account minimums, and the range of investment products available. Some popular brokerages include Charles Schwab, Fidelity, E*TRADE, and TD Ameritrade, among others.
Fund your account: Once your brokerage account is set up, you’ll need to fund it with the amount you intend to invest in Bitcoin ETFs. You can typically transfer funds from your bank account or other financial institutions to your brokerage account through electronic funds transfer (EFT), wire transfer, or check. The funding process may take a few days, depending on your chosen brokerage and transfer method.
Choose the Bitcoin ETF: After researching and comparing different Bitcoin ETFs, select the one that aligns with your investment goals and risk tolerance. Make a note of the ETF’s ticker symbol, which is a unique identifier used to trade the ETF on the stock exchange.
Place an order: Log in to your brokerage account and navigate to the trading platform. Enter the ETF’s ticker symbol and decide on the number of shares you want to purchase.
There are two main types of orders you can place:
a. Market order: This type of order is executed immediately at the current market price. It is generally faster but may result in a higher or lower price than anticipated, depending on market volatility.
b. Limit order: With a limit order, you specify the maximum or minimum price you’re willing to pay for the ETF shares. This type of order provides more control over the price but may not be executed if the market price doesn’t reach your specified limit.
Monitor your investment: After you’ve successfully purchased the Bitcoin ETF shares, it’s important to regularly monitor your investment. Keep track of the ETF’s performance, any changes in the cryptocurrency market, and relevant news that may impact your investment. It’s also essential to review your investment strategy periodically and make adjustments as needed.
Tax implications: Be aware of the tax implications associated with investing in Bitcoin ETFs. In many jurisdictions, ETF gains are subject to capital gains tax, and you’ll need to report your earnings accordingly. Consult with a tax professional to ensure you’re in compliance with all applicable tax laws and regulations.
Please remember that investing in Bitcoin ETFs, like any investment, carries risks. It’s crucial to carefully assess your financial goals, risk tolerance, and investment horizon before committing any funds. Consulting with a financial advisor can also be helpful to ensure you’re making well-informed decisions.
Bitcoin ETF in The United States
At the time of this writing there was no SPOT Bitcoin ETF approved in the United States. However, the U.S. Securities and Exchange Commission (SEC) has been reviewing multiple applications for Bitcoin ETFs. The SEC’s decision on these applications could pave the way for spot Bitcoin ETFs to become available for trading on U.S. stock exchanges.
The SEC has historically been cautious about approving a Bitcoin ETF, citing concerns related to market manipulation, liquidity, custody, and investor protection.
However, the approval of Bitcoin ETFs in other countries, such as Canada, has added pressure on the SEC to reconsider its stance.
The increasing adoption of cryptocurrencies, growing interest from institutional investors, and the maturation of the cryptocurrency market have also contributed to a more favorable environment for the eventual approval of a spot Bitcoin ETF in the United States.
Some of the high-profile applications submitted to the SEC for consideration include those from VanEck, Fidelity, ProShares, and Valkyrie.
These applications propose different structures for their respective ETFs, including ETFs that invest in Bitcoin directly, ETFs that hold Bitcoin futures contracts, and ETFs that invest in companies involved in the cryptocurrency industry.
To get the most up-to-date information on the status of Bitcoin ETFs in the United States it is advisable to check the latest news and SEC announcements on the SEC’s website.
If a Spot Bitcoin ETF gets approved and becomes available for trading, investors in the United States will be able to gain exposure to the price of Bitcoin through a regulated and more accessible investment vehicle.
Bitcoin ETFs offer a regulated and relatively simple way for investors to gain exposure to the price of Bitcoin.
While they come with their own set of advantages and disadvantages, these funds can be an attractive option for those looking to invest in the cryptocurrency space without dealing with the intricacies of direct Bitcoin ownership.
As the regulatory landscape evolves and new ETFs are introduced, investors can expect a wider variety of options, providing them with more opportunities to invest in this rapidly growing asset class.
It is essential to conduct thorough research and consider individual risk tolerance before making any investment decisions in the world of cryptocurrencies and Bitcoin ETFs.