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List of the Best Crypto & Bitcoin ETFs

ARK Next Generation Internet ETF (ARKW)

Investors seeking to profit from the growth potential of the next generation of internet technologies will find the ARK Next Generation Internet ETF (ARKW) an excellent option. The top crypto ETF focuses on companies involved in cloud computing, artificial intelligence, blockchain technology, and e-commerce, which greatly reduces the risk associated with investing in individual stocks. Additionally, the exchange tarded fund offers exposure to both domestic and international companies, enabling investors to capitalize on global trends in the internet industry. With a low expense ratio of 0.88%, ARKW has a proven track record of strong performance over the years

Bitwise Crypto Industry Innovators ETF (BITQ)

Investors who are looking to participate in the growth of the crypto industry may find BITQ to be a suitable choice. This top cryptocurrency ETF invests in various companies involved in the crypto sector, including those engaged in mining, trading, and infrastructure. With a diversified portfolio spanning across finance, technology, and consumer goods, BITQ has shown strong performance and has a low expense ratio of 0.85%. It may be a good option for those who want to manage their risk exposure while believing in the long-term potential of cryptocurrencies.

Blockchain & Bitcoin Strategy ETF (BITS)

This blockchain ETF seeks to track the performance of companies participating in the blockchain and Bitcoin ecosystems. It makes investments in firms that stand to benefit from the expansion and use of blockchain technology, such as those involved in cryptocurrency mining, software development, hardware manufacturing, and financial services. BITS has a low expenditure ratio of 0.70% and has performed well throughout the years. This ETF is appropriate for investors interested in both blockchain technology and Bitcoin.

ProShares Bitcoin Strategy ETF (BITO)

BITO provides a regulated and transparent alternative for people to invest in bitcoin. It is the first Bitcoin ETF to receive SEC clearance in the United States. It gives investors direct exposure to Bitcoin through the purchase of Bitcoin futures contracts. The ETF is designed to mimic the performance of the Bitcoin futures market and provides an easy method to obtain exposure to the cryptocurrency without actually holding it. It has a low expense ratio of 0.95% and has performed well since its beginning.

ProShares Short Bitcoin ETF (BITI)

This ETF is intended for investors who believe Bitcoin’s price will fall. The fund accomplishes this by generating returns that are inversely connected to the price of Bitcoin using a combination of short positions and derivatives contracts. BITI tries to generate the S&P CME Bitcoin Futures Index’s inverse (-1x) daily return. The ETF provides a mechanism to possibly profit from a drop in the price of Bitcoin by shorting Bitcoin futures contracts. However, before investing in BITI, investors should carefully evaluate the dangers and volatility associated with shorting Bitcoin. BITI’s expense ratio is 0.95%.

The Valkyrie Bitcoin Miners ETF (WGMI)

This ETF allows investors to invest in Bitcoin mining without actually owning and operating mining equipment. It makes investments in firms involved in Bitcoin mining and production, as well as associated operations like as mining equipment manufacturing and mining infrastructure development. The ETF aims to give investors exposure to the Bitcoin mining industry and its potential for growth. WGMI has a 0.50% expense ratio.

VanEck Bitcoin Strategy ETF (XBTF)

XBTF is another top ETF that tries to provide exposure to Bitcoin’s performance. It accomplishes this by investing in firms involved in the development and application of blockchain technology and Bitcoin. It boasts a diverse portfolio of companies in numerous industries, including banking, technology, and consumer products, and it provides a holistic approach to Bitcoin investing, combining direct exposure to BTC with investments in companies participating in the Bitcoin ecosystem. XBTF intends to give investors a balanced exposure to the potential development and innovation in the cryptocurrency field by diversifying across different parts of the Bitcoin market. The expenditure ratio for XBTF is 0.65%.

Valkyrie Bitcoin Strategy ETF (BTF)

The ETF invests in Bitcoin futures contracts, Bitcoin mining companies, digital asset exchanges, and blockchain technology companies to capture the potential upside of Bitcoin while mitigating volatility and risks. Like other ETFs, BFT offers a convenient and accessible way to invest in Bitcoin without owning the cryptocurrency directly, allowing investors to benefit from the potential growth and innovation in the cryptocurrency space.

Simplify Bitcoin Strategy PLUS Inc ETF (MAXI)

MAXI is an actively managed ETF that focuses on providing exposure to Bitcoin. It invests in Bitcoin futures contracts and also has the flexibility to invest in other Bitcoin-related instruments. The ETF aims to provide investors with enhanced returns compared to traditional passive Bitcoin ETFs by actively managing its portfolio based on market conditions and opportunities. MAXI has an expense ratio of 0.95%

Global X Blockchain & Bitcoin Strategy ETF (BITS)

BITS is an exchange-traded fund that invests in firms active in the blockchain and Bitcoin ecosystems. Its goal is to follow the performance of the Solactive Blockchain & Bitcoin Performance-Index while also providing exposure to firms that are projected to profit from the expansion and acceptance of blockchain technology. This provides investors with a diversified approach to gaining exposure to the blockchain and Bitcoin sectors. BITS has an expense ratio of 0.50%

Summary Table

Fund AUM Expense Ratio
ARK Next Generation Internet ETF (ARKW) $1.30 billion 0.88%
Bitwise Crypto Industry Innovators ETF (BITQ) $53.5 million 0.85%
Blockchain & Bitcoin Strategy ETF (BITS) $37.68 million 0.70%
ProShares Bitcoin Strategy ETF (BITO) $935.77 million 0.95%
ProShares Short Bitcoin ETF (BITI) $80 million 0.95%
The Valkyrie Bitcoin Miners ETF (WGMI) %16.03 million 0.50%
VanEck Bitcoin Strategy ETF (XBTF) $41.82 million 0.65%
Valkyrie Bitcoin Strategy ETF (BTF) $29.87 million 0.95%
Simplify Bitcoin Strategy PLUS Inc ETF (MAXI) $22.75 million 0.95%
Global X Blockchain & Bitcoin Strategy ETF (BITS) $10.5 million 0.50%

What is a Bitcoin ETF?

A Bitcoin ETF, also known as a Bitcoin exchange-traded fund, is a financial product that allows traders to get exposed to the price changes of BTC without necessarily owning the digital coins. It is designed to mirror the performance of the underlying asset or index of publicly traded Bitcoin and can be traded on regular stock exchanges rather than cryptocurrency trading exchanges like Coinbase and Binance. Bitcoin ETFs provide a dependable and regulated platform for investors to expose their funds to Bitcoin’s potential without the hassles of directly purchasing and holding the coin. They play an important function in the cryptocurrency market by increasing the number of options available to investors and generating increased enthusiasm and optimism. The important thing to remember is that Bitcoin ETFs do not invest directly in Bitcoin, but rather on financial items such as Bitcoin futures contracts or other investments that correlate to the cryptocurrency’s price. Stay with us as we get into the specifics

Accessibility:

Accessibility:

Bitcoin ETFs provide a convenient way for mainstream investors to gain exposure to Bitcoin without the complexities of directly owning and managing the cryptocurrency. They can be bought, sold, and traded on traditional stock market exchanges, making them easily accessible to investors familiar with traditional investment vehicles.

Diversification:

Diversification:

Bitcoin ETFs often hold a basket of Bitcoin or Bitcoin-related assets, allowing investors to diversify their crypto investments within a single fund. This diversification can help mitigate risks associated with holding a single cryptocurrency and provide exposure to the broader crypto market.

Liquidity and Transparency:

Liquidity and Transparency:

Bitcoin ETFs offer liquidity and transparency similar to other publicly-traded securities. Investors can buy and sell shares of the ETF on a daily basis, providing flexibility and ease of trading.

Market Volatility:

Market Volatility:

Bitcoin ETFs are subject to market volatility, as the price of Bitcoin can experience significant fluctuations. Sudden sell-offs or large institutional investments can impact the price of Bitcoin and, consequently, the value of the ETF.

Regulatory Considerations:

Regulatory Considerations:

The approval and regulation of Bitcoin ETFs vary across jurisdictions. Regulatory decisions and changes can impact the availability and performance of Bitcoin ETFs, introducing potential risks and uncertainties.

Price Inaccuracy:

Price Inaccuracy:

Since Bitcoin ETFs often hold multiple holdings, a rise or decline in the price of Bitcoin may not perfectly reflect the ETF’s price.

How do Bitcoin ETFs Work?

bitcoins iconBitcoin ETFs provide a convenient way for mainstream investors to gain exposure to Bitcoin without the complexities of directly owning and managing the cryptocurrency. They can be bought, sold, and traded on traditional stock market exchanges, making them easily accessible to investors familiar with traditional investment vehicles.a

A Bitcoin ETF functions by holding Bitcoin as its primary underlying asset. Consider it to be a fund that owns a set amount of actual Bitcoin. This is how the ETF intends to replicate Bitcoin’s market performance. For example, if the price of Bitcoin rises, the value of the ETF shares should rise as well, and vice versa. The ETF uses a variety of tracking tools to keep track of Bitcoin’s price movements. One such way is “physical replication,” in which the ETF acquires and holds Bitcoin directly in its portfolio. Another way is “synthetic replication,” in which the ETF replicates Bitcoin price movements using derivatives such as futures contracts. Bitcoin ETFs are classified into two types: spot Bitcoin ETFs and Bitcoin futures ETFs. A spot Bitcoin ETF is backed by physical Bitcoins, which support the ETF’s value. If the value of the digital coins underlying the ETF rises, the value of the investment will climb as well. A physically-backed Bitcoin ETF is the simplest way to invest in Bitcoin without first purchasing it on a cryptocurrency exchange and holding the coins. A Bitcoin ETF can be connected to Bitcoin futures contracts, allowing investors to have exposure to Bitcoin without physically trading it. Bitcoin ETFs’ underlying assets are connected to Bitcoin futures contracts traded on the Chicago Mercantile Exchange. A Bitcoin ETF’s Bitcoin assets are carefully kept in trust by regulated custodians on behalf of the fund issuer, typically in cold storage wallets. When a seller requests that their ETF units be redeemed, the ETF provider sells a similar quantity of Bitcoin to fund the redemption. Authorized participants participate in the production and redemption of Bitcoin ETF shares by purchasing or selling the ETF’s underlying assets and delivering them to the ETF provider in return for ETF shares.

Key Considerations for Selecting Top Bitcoin ETFs

Price

The price of a Bitcoin ETF is an important consideration for investors. Some ETFs may have a higher price per share, making them less accessible to investors with smaller budgets. Investors should also consider the price of the underlying assets, such as Bitcoin or Bitcoin futures contracts, that the ETF tracks.

Expense Ratios

Expense ratios are the annual fees charged by ETFs to cover operating expenses. Lower expense ratios can lead to higher returns for investors over the long term. Investors should compare the expense ratios of different Bitcoin ETFs to find the most cost-effective option.

Minimum Investment

Minimum investment amounts can vary widely among Bitcoin ETFs. Some ETFs may require a minimum investment of several thousand dollars, while others may have no minimum investment requirement. Investors should consider their budget and investment goals when selecting a Bitcoin ETF with an appropriate minimum investment amount.

Assets Under Management

The assets under management (AUM) of a Bitcoin ETF can provide insight into its popularity and performance. Higher AUM can indicate greater investor confidence and interest in the ETF. However, investors should not rely solely on AUM when selecting a Bitcoin ETF, as it does not necessarily reflect the quality or suitability of the investment.

Why don’t Bitcoin ETFs Own Bitcoin?

While Bitcoin ETFs are intended to give investors exposure to Bitcoin’s price swings, they normally do not actually hold the cryptocurrency for a variety of reasons, the most important of which are regulatory and operational in nature. Traditional financial markets are governed by well-established regulations that safeguard investors and preserve market integrity. However, because cryptocurrencies are decentralized and relatively young, they frequently lack the same level of regulatory clarity. Due to the lack of regulation in the cryptocurrency industry, the Securities and Exchange Commission (SEC) has rejected many applications for Bitcoin ETFs. To overcome these obstacles, Bitcoin ETFs frequently use other ways for tracking Bitcoin’s value:

  • Futures Contracts: Instead of holding actual Bitcoin, some Bitcoin ETFs use Bitcoin futures contracts. These are agreements to buy or sell Bitcoin at a predetermined price on a specific future date, but do not involve direct ownership..
  • Swaps and Derivatives: Bitcoin ETFs might use financial instruments known as swaps and derivatives to replicate Bitcoin’s price movements. These contracts allow investors to exchange cash flows based on changes in Bitcoin’s price without needing to hold the cryptocurrency itself.
  • Index-Based Approach: Some Bitcoin ETFs follow an index-based approach, where they track the performance of a specific Bitcoin index. The index could be calculated based on the prices of Bitcoin on various exchanges.

Bitcoin ETF Fees

Expense Ratios:

Expense ratios are a fundamental aspect of ETF fees. This ratio represents the percentage of an ETF’s total assets that are used to cover various costs associated with managing and operating the fund. These costs include administrative expenses, custodial fees, legal fees, and compensation for the fund’s management team. Expense ratios are expressed as an annual percentage and are deducted from the ETF’s assets on an ongoing basis. The expense ratio, which comprises management fees and other operational costs, directly reduces the fund’s net returns. If you invest $1,000 in an ETF with a 1% expense ratio, you’re essentially paying $10 annually in fees regardless of the fund’s performance.

Management Fees:

Management fees are a part of the expense ratio and are specifically paid to the team responsible for managing the ETF. This team is responsible for making investment decisions, portfolio rebalancing, and ensuring that the ETF tracks its intended benchmark or investment strategy. These fees are usually a fixed percentage of the ETF’s average assets under management and contribute to the overall expense ratio. It’s important to note that fees can compound over time, potentially reducing overall returns, as the absolute dollar amount paid in fees increases as your investment grows.

Trading Costs:

It is important to keep in mind that trading costs are associated with purchasing and selling the assets that make up an ETF, even if they are not factored into the expense ratio. These costs can include brokerage commissions, bid-ask spreads, and potential market impact. It is wise to consider the expense ratios and fees of different Bitcoin ETFs, as those with lower costs can provide a competitive edge by allowing more of your investment to work for you instead of being consumed by fees.

Creation and Redemption Costs:

Bitcoin ETFs rely on authorized participants (APs) to issue and redeem shares. These APs might charge transaction fees to cover the prices paid for the underlying assets of the ETF shares they trade. Higher fees, however, can increase the tracking inaccuracy between the ETF’s performance and the performance of the underlying Bitcoin, thus decreasing your profits over time.

How Often Do Bitcoin ETFs Pay Out?

Bitcoin ETFs do not operate like traditional stocks or income-focused investment funds, as they do not provide regular payouts in dividends or income distributions. Instead, their returns are based on the performance of the underlying Bitcoin market. Investors can potentially earn capital gains if the value of Bitcoin rises, and conversely, they may experience losses if the value of Bitcoin falls. In a well performing market, the frequency and distribution of payouts vary based on the review terms of the strategy used. For example:

  • Global X Blockchain & Bitcoin Strategy ETF (BITS) pays out distributions semi-annually
  • ProShares Bitcoin Strategy ETF (BITO) pays out dividends annually
  • Bitcoin ETFs do not always pay out distributions or dividends. Some ETFs are designed to track the price of Bitcoin and do not distribute income to investors
bitcoin

Is it Better to Invest in Bitcoin or Bitcoin ETF?

When comparing direct Bitcoin investment to Bitcoin ETFs, there are several factors to consider:

  • Risk: Investing directly in Bitcoin carries the risk of price volatility and potential losses. On the other hand, Bitcoin ETFs can provide diversification and potentially reduce volatility in the Bitcoin market.
  • Convenience: Bitcoin ETFs offer the convenience of buying and selling shares on traditional stock exchanges, making it easier for investors to gain exposure to Bitcoin. However, investing directly in Bitcoin requires setting up a digital wallet and navigating cryptocurrency exchanges.
  • Exposure to the cryptocurrency market: Investing directly in Bitcoin allows investors to directly participate in the cryptocurrency market and potentially benefit from its growth. Bitcoin ETFs, on the other hand, provide indirect exposure to Bitcoin’s performance through the underlying Bitcoin market.
  • Fees: Bitcoin ETFs have expense ratios and management fees that can impact investment returns. Investing directly in Bitcoin may involve transaction fees charged by cryptocurrency exchanges.
  • Security: Bitcoin ETFs offer a higher level of security compared to holding Bitcoin directly, as they are regulated financial products and subject to security measures. However, there are still concerns about market manipulation, fraud, and theft in the cryptocurrency market.

How to Invest in Bitcoin ETFs

Choose a brokerage: Select a reputable brokerage that offers Bitcoin ETFs. Look for a brokerage that provides a user-friendly platform, competitive fees, and strong security measures.

Set up an account: Sign up for an account with the chosen brokerage. This typically involves providing personal information and verifying your identity.

Fund your account: Deposit funds into your brokerage account. You can typically do this through bank transfers, credit/debit cards, or other accepted payment methods.

Research and select a Bitcoin ETF: Explore the available Bitcoin ETF options offered by the brokerage. Consider factors such as the ETF’s expense ratio, performance history, and the underlying index it tracks.

Place an order: Once you have chosen a Bitcoin ETF, place a buy order for the desired amount of shares. Specify the price at which you want to buy or opt for a market order for immediate execution.

Monitor your investment: Keep track of the performance of your Bitcoin ETF investment over time. You can use the brokerage’s platform to monitor the value of your investment and make informed decisions.

What is the Future of Bitcoin ETFs?

The future of Bitcoin ETFs holds significant potential for the cryptocurrency industry. Regulatory trends play a crucial role in shaping their evolution. The approval of a Bitcoin ETF would establish Bitcoin as an investable asset class. This would attract more sophisticated investors and increase media coverage, ultimately leading to mainstream adoption. Institutional demand for Bitcoin could also surge as Wall Street giants, such as BlackRock, seek approval for a Bitcoin ETF. Moreover, Bitcoin ETFs would make it easier for both institutional and individual investors to access Bitcoin, indicating market maturity and increasing public knowledge about cryptocurrencies. Most importantly, regulatory hurdles, concerns about market manipulation, and surveillance sharing need to be addressed. However, the future of Bitcoin exchange traded-funds looks promising, bridging the gap between traditional finance and the crypto market, and providing a gateway for investors to diversify their portfolios.

Final Thoughts

Cryptocurrency ETFs are a promising investment option for those interested in digital assets like Bitcoin. They offer a regulated and accessible way to gain exposure to the potential gains of cryptocurrencies without the complexities of direct ownership. However, caution is advised when investing in these ETFs, as they come with risks, and thorough research and understanding of one’s risk tolerance is necessary. As technology advances and the regulatory landscape develops, Crypto and Bitcoin ETFs could play a significant role in reshaping the investment landscape and propelling digital assets into the mainstream. It’s important to balance the excitement of innovation with careful consideration to unlock their true potential in your investment strategy.

Q&A Session

Welcome to the Q&A session, where the author of this article will address some of the most common questions about Bitcoin ETFs.

Feel free to submit your questions through our contact form, and we’ll strive to respond within 48 hours. Remember that investing in any financial product involves risk, so it’s important to gather information, consider your personal circumstances, and seek advice if needed before making investment decisions.

Bitcoin ETFs can be a suitable investment for those seeking exposure to Bitcoin’s price movements without the complexities of direct ownership. However, like any investment, it’s important to consider your risk tolerance, investment goals, and do thorough research before making a decision. Bitcoin’s volatility and the fees associated with ETFs should be carefully evaluated.

Bitcoin itself does not generate dividends or income in the traditional sense. As a result, Bitcoin ETFs do not pay dividends. Investors in these ETFs primarily benefit from potential capital appreciation based on Bitcoin’s price movements.

The “best” Bitcoin ETF varies based on individual preferences, risk appetite, and investment goals. It’s crucial to research and compare different ETFs based on factors like expense ratios, tracking methods, historical performance, and the reputation of the issuing company. Choose an ETF that aligns with your investment strategy.

The ETF that holds the most Bitcoin depends on the specific offerings available in the market at any given time. The ARK Next Generation Internet ETF (ARKW) holds the most Bitcoin among the ETFs discussed in this article. It has assets under management (AUM) of $1.30 billion.

Bitcoin ETFs that are offered by reputable financial institutions and comply with regulatory standards are generally considered safe. These ETFs undergo regulatory scrutiny, and authorized participants play a role in ensuring their stability. However, it’s important to conduct due diligence and choose established brokerages to minimize risks.

Bitcoin Futures ETFs are a type of exchange-traded fund that tracks the performance of Bitcoin futures contracts. These contracts allow investors to speculate on the future price of Bitcoin without owning the cryptocurrency itself. Bitcoin Futures ETFs can offer exposure to Bitcoin’s price movements while operating within regulated financial markets.

Eugene Abungana

Eugene Abungana

Author | Investment Analyst, Financial Analyst, and Institutional Trader

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