The best bitcoin exchange-traded funds offer price exposure to the original crypto that is close to the asset itself without the necessity of purchasing it directly. That can be advantageous for various reasons, many of them regulatory.
These funds can help with that and offer investors the benefit of not having to store their own bitcoin, which can be intimidating for novices and heighten your risk, depending on your route.
It’s also important to note that the U.S. Securities and Exchange Commission has refused to give the green light to simple spot bitcoin ETFs. That means investing in futures contracts might be the best alternative. That could widen the spread between returns on ETFs and bitcoin itself, warranting a closer look at each fund.
In screening for the best bitcoin ETFs, we analyzed fees, minimum investment amounts and trading volumes, among other factors.
Compare the best bitcoin ETFs
Methodology
We have reviewed some of the biggest bitcoin ETFs approved for trading by the SEC. With the space constantly evolving, the list could change going forward.
There are multiple spot ETF applications currently with the SEC, which has so far rejected them all.
We assessed the ETF prospectuses to break down how exactly the funds gain exposure to bitcoin as well as what other exposure, if any, is pursued. To gain bitcoin exposure, all these ETFs invested in futures contracts, described in further detail below.
We also compared fee structure, which is vital concerning bottom-line returns to investors, as well as how each fund is structured.
Why other bitcoin ETFs didn’t make the cut
The Grayscale Bitcoin Trust is the biggest bitcoin fund in the world. Yet it was omitted from this piece because it is a trust, not an ETF. Grayscale, the fund’s parent company, even filed suit against the SEC in June for rejecting its application to convert the trust to ETF status.
Grayscale alleged the rejection was “arbitrary, capricious and discriminatory.”
There has also been concern among investors regarding the trust’s lack of transparency about its underlying reserves amid the contagion flowing across the industry following the collapse of FTX in the fourth quarter of 2022.
Genesis, a crypto lending company that has the same parent company as Grayscale, DCG, also filed for bankruptcy in January. This triggered worry among Grayscale investors, who cannot liquidate their holdings conveniently like ETF investors can due to the fact that it is a trust.
All these concerns have led to Grayscale trading at a significant discount to its net asset value, rising close to 50% in the aftermath of the FTX collapse in November.
Final verdict
A few of these funds are quite similar, striving to provide exposure to bitcoin for as cheap a price as possible.
The bigger funds are the most popular for a reason. They tend to be the simplest and strive to provide investors with returns as close as possible to those that would have been achieved by holding bitcoin directly.
With that in mind, it is difficult to argue against the two ProShares iterations (depending on whether you want long or short exposure), while the VanEck fund provides an option for a cheaper fee.
With any ETF, however, there will always be a divergence between investor returns and the return of the underlying asset given the funds do not hold bitcoin directly as well as the fees investors must pay.
If investors are too intimidated to own bitcoin directly, that could be a sign more research is needed before jumping into the space, rather than pursuing a different investment vehicle. Perhaps this should be the biggest takeaway: Whether you invest in bitcoin directly or through an ETF, this asset class remains extremely volatile.
It is also a space that is changing drastically. Whether you agree with it or not, look no further than the SEC’s heretofore refusal to approve a Bitcoin spot ETF for evidence of the many moving parts and risks involved in the crypto space.
Frequently asked questions (FAQs)
The largest Bitcoin ETF is the ProShares Bitcoin Strategy ETF, with more than $915 million in assets under management.
Most bitcoin ETFs do not own bitcoin. Instead, they commonly own bitcoin futures contracts, which are agreements to purchase an asset at a specified point in the future. They tend to be more closely regulated while still closely tracking the underlying asset — bitcoin — and offering good liquidity.
But there are cons to this approach. The futures are dated at a specific point in the future, meaning they must be continuously rolled over as time progresses and replaced with longer-dated contracts. There is a cost to this process, which increases fees for investors.
Applications for spot ETFs, which would directly own the underlying bitcoin, have thus far been rejected in the U.S. by the SEC.
Vanguard does not have an ETF for bitcoin.
“Since cryptocurrencies are highly speculative in their current state, Vanguard believes their long-term investment case is weak,” the ETF giant says on its website.
While 2022 was immensely damaging for bitcoin’s reputation with institutions, it remains tough to predict the future. Vanguard, at least overtly, has not fully shut the door on bitcoin.
“While we don’t currently offer cryptocurrencies as an investment option, we acknowledge the impact they’re making in the investing world. As cryptocurrencies and blockchain become increasingly mainstream, we’ll continue to monitor their development and discern the best path forward for our investors,” Vanguard says on its website.
