Spot Bitcoin ETFs: Everything You Need to Know

Most crypto ETFs are still based on derivatives like futures contracts, or offer exposure to companies that own cryptocurrency or operate in the cryptocurrency industry. As the cryptocurrency market matures and gains mainstream acceptance, crypto ETFs have a central role as investors want exposure to digital currencies. Below, we discuss the pros and cons of crypto ETFs, the different strategies each type of crypto aligns with, and their potential rewards and pitfalls. In addition to allocating funds to futures and spot ETFs, investors can put their money into several other what is an etf crypto ETF-like products for crypto exposure.

Now That They’re Here, What’s the Future of Spot Bitcoin ETFs?

However, because prices vary so much, there is more risk involved in crypto ETFs. If you’re considering adding these to your portfolio, speaking with a financial advisor about your specific circumstances and goals is always the prudent choice. Crypto ETPs, when discussed, refer, however, to those that specifically hold debt securities issued by special purpose vehicles (SPVs) that hold the underlying crypto assets. The SPV uses the crypto as collateral to issue the ETPs, which are traded on exchanges. But instead of just choosing the top seven bitcoin ETFs, GOBankingRates only chose those that stood out as the https://www.xcritical.com/ best of the best. The result was a mix of crypto ETFs that don’t just track the price of the particular cryptocurrency — but invest in crypto-related companies.

Investing in Cryptocurrency ETFs

The expense ratio of 0.12% is very competitive, making it one of the best crypto ETFs in terms of cost efficiency. This exposure is more intuitive for investors, making spot Bitcoin ETFs more straightforward for those investing in Bitcoin. Spot Bitcoin ETFs can thus be more transparent since each share of the ETF corresponds to a specific number of Bitcoins held. It’s important to note that just because spot bitcoin ETFs have been approved, that does not mean the SEC is certain to approve additional crypto ETFs.

Limitations of Bitcoin Futures ETFs

With the approval of 11 spot bitcoin ETFs in January 2024, traditional investors have an even easier way to invest in bitcoin. Disclaimer – Information found on our website is not a recommendation or financial advice. Our website and marketing collateral use reference rates as an indicator only and should not be used for decision making.

How is a crypto ETF different from a crypto exchange?

There are also no current plans in the short term to list an ETF that holds crypto tokens, however, the company BetaShares is looking to launch an ETF that tracks crypto-related companies. And while Australia hasn’t approved crypto ETFs as of October 2021, it may in the future as other Western nations make moves to provide clear regulations and welcome crypto ETFs. As the crypto investment landscape continues to evolve, staying informed and agile is key to harnessing the potential of these transformative investment vehicles.

What’s so special about a Bitcoin ETF?

You always have the option to take full custody of your coins at any time. Whether products shown are available to you is subject to individual provider sole approval and discretion in accordance with the eligibility criteria and T&Cs on the provider website. For Australian investors eyeing the crypto market, several crypto ETFs are available on the Australian Securities Exchange (ASX) and Cboe Australia (CXA).

A beginner’s guide to Bitcoin and cryptocurrency ETFs

Investing in companies that hold cryptocurrencies on their balance sheet is another way to invest in crypto without owning the digital tokens. For example, MicroStrategy (MSTR) owned about 214,000 bitcoins as of May 2024. Galaxy Digital Holdings (BRPHF) and Tesla (TSLA) are other publicly listed companies with bitcoins on their balance sheets.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Traders with a keen eye for them often have an edge in managing their crypto positions. Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. The major benefit of crypto ETFs is that you can invest in them in the same way as any other ETF.

Bitcoin Futures ETF: Definition, How It Works, and How to Invest

Over the years, many other proposals were also turned down for similar reasons. In January 2024, the SEC finally approved multiple spot Bitcoin ETFs, with SEC chair Gary Gensler conceding that “circumstances, however, have changed” following the court’s decision. The tides began to shift in 2023, when the world’s largest asset manager, BlackRock, shocked the financial world with its filing to run a Bitcoin ETF. And to put it plainly, that is an extremely appealing proposition for many regular folks—as well as sophisticated institutional investors.

When you invest in a bitcoin ETF, you’re not directly purchasing bitcoin itself. Cryptocurrency exchange-traded funds (ETFs) track the price performance of cryptocurrencies by investing in a portfolio linked to their instruments. Like other such funds, crypto ETFs trade on regular stock exchanges, and investors can hold them in their standard brokerage accounts. They provide investors without the means or desire to invest directly in cryptocurrency a way to gain exposure to these volatile and sometimes lucrative assets. Spot Bitcoin ETFs are exchange-traded products (ETPs) that hold Bitcoins in a secure digital vault, which registered custodians manage. The ETF begins by buying Bitcoins from other holders or through authorized cryptocurrency exchanges.

Because Bitcoin Future ETFs are relatively new (compared to more established equity ETFs), newer funds may temporarily have higher liquidity risk as they ramp up with investments and share issuance. While you don’t technically have cryptocurrency in your wallet, you have security keys that you need to safeguard if you own Bitcoin. If you buy your cryptocurrency through an exchange, you can choose to have your keys stored on that exchange if it offers that service.

• Other funds that invest in Bitcoin futures have experienced this problem in recent years.
• Bitcoin’s price was already rising in the weeks leading up to the spot bitcoin ETF announcement—and a “sell the news” moment happened in the wake of the approval.
• It provides diversification and is managed by professional fund managers.
• With the advent of spot bitcoin ETFs, many were found to have higher market caps than most other crypto-related ETFs.
• Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator.

Their activity is crucial in maintaining a stable market, ensuring that investors can easily buy or sell shares of the ETF when needed. Spot bitcoin ETFs make it easier for retail investors and traders to buy and sell an asset tied to the current value of bitcoin without needing to hold bitcoin itself. They also allow investors seeking exposure to bitcoin in retirement accounts to have a much simpler option than opening a self-directed IRA that could hold bitcoin directly. All of this has intensified the appeal of a spot Bitcoin ETF, or exchange-traded fund, which enables investors to gain exposure to Bitcoin without the hassle of owning it themselves. In these markets, a way to gain some exposure to cryptocurrencies is through ETFs that track related sectors, such as blockchain. You’ll also need to pay a management fee to the ETF issuer, but this is included in the unit price.

Finally, it’s important to compare a crypto ETF’s performance and fees with similar ones. High fees can eat into returns, so choose ETFs offering a competitive edge in performance and cost. From this timeline, you can see how crypto ETFs have evolved from their inception in Europe to become a significant part of the investment landscape. Canada made headlines in February 2021 by launching the Purpose Bitcoin ETF (BTCC) on the Toronto Stock Exchange.

Crypto ETFs allow you to gain exposure to these currencies through your regular brokerage account, eliminating the need to directly purchase and store the tokens yourself. These funds typically track the performance of one or more cryptocurrencies, providing investors with a convenient way to diversify their portfolios and benefit from the potential growth of this market. The first crypto futures funds launched in 2021; spot bitcoin ETFs joined them in early 2024 and spot ether (ETH) ETFs were effectively approved in May of the same year. A cryptocurrency ETF, or exchange-traded fund, is a basket of stocks or investments related to the cryptocurrency industry.

With the SEC’s approval of spot bitcoin ETFs in early 2024, the global market has witnessed a significant shift. This move not only endorses the legitimacy of cryptocurrencies, but also opens avenues for international markets to explore similar financial products. For instance, a bitcoin ETF would reflect the price movements of bitcoin. Much like traditional stocks, crypto ETFs are traded on stock exchanges.

So, a Bitcoin futures ETF is an exchange-traded fund that holds Bitcoin futures contracts and sells shares of the fund to investors. Crypto ETFs offer investors an easy way to gain exposure to crypto investments without holding digital coins. As with cryptocurrencies — and any investment, for that matter — there is no guarantee of financial gain with these funds. Never invest more than you can afford to lose, and understand your risk tolerance as you build your portfolio. To select the top crypto ETFs, GOBankingRates first reviewed the largest funds with the highest total assets under management.

We may also receive payment if you click on certain links posted on our site. As such, ETFs are more suited to people looking for a long-term buy and hold investment rather than something to actively trade. Patrick McGimpsey is a freelance writer passionate about crypto and its impact on the financial world. Currently working as the content lead for Australian startup CryptoTaxCalculator, Patrick has also covered the crypto industry for Canstar and The Chainsaw. Patrick has over seven years of experience in the crypto space and has previously shared his knowledge with the AML and fraud departments of Australian financial Institutions. The ripple effect of BlackRock’s filing is evident as asset management giants like Fidelity, Invesco, and WisdomTree have revisited their ambitions for spot Bitcoin ETFs.

Bitwise is another popular spot bitcoin ETF that offers a low expense ratio and direct exposure to the spot price of bitcoin itself. Bitwise is a crypto-centric fund manager that offers services to institutional investors and financial advisers to help investors gain access to crypto-related funds. Instead of holding the actual cryptocurrency, future ETFs invest in futures contracts on the digital asset.

However, these ETFs do not allow you to take custody of the bitcoin represented by your ETF shares. A Bitcoin ETF is managed by a firm that buys and holds the actual Bitcoin; the price is pegged to the Bitcoin held in the fund. The firm lists the ETF on a traditional stock exchange, and you, the investor, trade the ETF just as you would any other stock. Bitcoin ETFs also offer new types of trading opportunities, including short-selling, where investors can bet against Bitcoin. It can bridge the gap between traditional finance and the digital asset sector, providing additional legitimacy to Bitcoin. However, like all innovations, a Bitcoin ETF raises challenges and concerns, such as regulatory hurdles and market risks, which must be addressed for its successful implementation and acceptance.