A Bitcoin ETF Is Here What Does That Mean for Investors?

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This ongoing maturation of the Bitcoin markets likely turned the tides for regulators and eventually gave way to the US Bitcoin ETF we see today. Still, for a long time, most eyes were on US regulators and whether or not they would allow for a US Bitcoin ETF. Finally, in October 2021, the US Safe haven investments Securities and Exchange Commission (SEC) accepted an application to list the ProShares Bitcoin Strategy ETF (BITO) on the NYSE. The first official Bitcoin-linked ETF was the Proshares Bitcoin Strategy ETF (BITO), approved by the SEC in October 2021 and listed on the New York Stock Exchange.

Its primary strategy involves investing in cash-settled bitcoin futures contracts on the Chicago Mercantile Exchange (CME). In the grand scheme of things, that is not too bad – funds with an expense ratio above 1.5% are the ones to avoid among ETFs. However, as the ETF would closely track the price of bitcoin, for the investor, it should make little difference whether they are holding a bitcoin ETF or the actual digital currency. The main difference between buying a bitcoin ETF versus bitcoin itself is that investors are purchasing a regulated investment vehicle, instead of buying and owning a crypto asset. A Bitcoin ETF is simply an exchange-traded fund consisting of bitcoin or assets linked to Bitcoin’s price. ETFs are regulated financial products, so Bitcoin and other cryptocurrency ETFs trade on traditional markets like the NASDAQ or New York Stock Exchange (NYSE) and not on a cryptocurrency exchange.

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Many people look toward the United States to get truly excited about a bitcoin exchange-traded fund. Securities and Exchange Commission (SEC) has proven challenging, with over a dozen applications and proposals rejected over the past few years. In this blog post, we will take an in-depth look at bitcoin ETFs, with a quick update regarding the current crypto ETF market in the US. After assessing the investment benefits of bitcoin ETFs, we will also try to map the path ahead from futures ETF to proper spot ETFs. Several US-based Bitcoin ETFs are available for investors, each with unique investment strategies and holdings. By offering a familiar investment structure, Bitcoin ETFs enable a wider range of investors to gain exposure to the cryptocurrency market.

  • But with a Bitcoin ETF, some portion of your fees would go to paying the custody and management fees for the purchase and storage of the Bitcoin that underlies the ETF.
  • Much like any investment trust, GBTC shares can’t be created and destroyed as demand shifts.
  • After completing their research, investors can choose the most suitable investment for their risk tolerance and investment goals.
  • Originally filed in 2021, that bid was rejected by the SEC in 2022.

Despite those factors, Luria said that if investors are comfortable with those concepts then a futures ETF might be the next best thing to investing in a spot ETF. “Because of contango the fund will actually be buying bitcoin forex trading plans at higher prices than the market,” D.A. “That means it’s not an efficient way to get exposure to [bitcoin],” the analyst said. The ProShares Bitcoin Strategy ETF (BITO) is the first cryptocurrency fund of its kind.

What to look for in a Bitcoin ETF?

In contrast, investing in Bitcoin itself at minimum requires setting up an account with a crypto brokerage, and perhaps looking into wallets for storage, too. We believe everyone should be able to make financial decisions with confidence. Andrey Sergeenkov is a freelance writer whose work has appeared in many cryptocurrency publications, including CoinDesk, Coinmarketcap, Cointelegraph and Hackermoon. On the other hand, owning bitcoin is good for those who want to engage in regular trading, spend BTC as a currency, or venture deeper into cryptocurrencies through trading or other means.

To make the cut, the index puts companies through a four-part process. The three top stocks by weighting are Coinbase Global, Marathon Digital Holdings, and Bitcoin miner Riot Platforms (RIOT). Crypto could get an additional boost on any favorable headlines surrounding the potential approval of bitcoin futures funds. The Valkyrie Bitcoin Strategy ETF is another ETF that invests in Bitcoin futures. It was launched by crypto asset manager Valkyrie, which sponsors several other crypto investment vehicles.

The fund seeks to track the performance of the Fidelity Crypto Industry and Digital Payments Index, a collection of businesses engaged in cryptocurrency, blockchain technology and digital payments processing. MicroStrategy (MSTR), the data analytics software company, is a top holding in BLOK, with a weighting of roughly 5%. The company is technically a data analytics software firm, however, it is more widely known for its Bitcoin investments. In May and June, for instance Microstrategy bought 12,000 bitcoin for $347 million. It now holds 152,333 bitcoin worth around $4 billion at current prices.

Research Bitcoin ETFs and Alternatives

The delayed ruling also raises the stakes for other companies looking to get approval for a spot ETF. BlackRock and Fidelity are still waiting on a decision from the SEC, while GlobalX, the exchange-traded funds provider that proposed a bitcoin ETF in August, also had approval for its fund application delayed on Tuesday. In July, QR Capital received another approval from the CVM to launch an Ether ETF that tracks the performance of Ether cryptocurrency. The fund would launch similar to the Bitcoin ETF, listing the shares on the B3 exchange under the ticker symbol QETH11.

Since Bitcoin ETFs typically hold Bitcoin futures, some experienced investors may choose to invest in Bitcoin futures in their own trading accounts. The Bitwise 10 Crypto Index Fund (BITW, $7.03), launched in November 2017, tracks the performance of the Bitwise 10 Large Cap Crypto Index, representing the 10 largest investable cryptocurrencies. These 10 cryptocurrencies account for approximately 70% of the total crypto market. Other top 10 holdings include Bitcoin miner Marathon Digital Holdings (MARA) and Coinbase Global (COIN), one of the world’s leading cryptocurrency exchanges. Also on the list is Overstock.com (OSTK), the internet retailer that’s rebranding under the Bed Bath & Beyond brand after buying the bankrupt company’s intellectual property for $21.5 million. Helping the entire digital assets arena in 2023 is the global push into artificial intelligence (AI) by companies of all sizes.

Want to Buy a Bitcoin Mining Stock? Read This Before You Invest.

Instead, they hold Bitcoin futures contracts, and in some cases the shares of companies and other ETFs active in the cryptocurrency space. Rather, it aims to provide capital appreciation by investing in BTC futures. However, it also uses short-dated put or call spreads on global equity indices to help generate income for its investors. VanEck Bitcoin Strategy ETF is an actively managed fund that launched in November 2021. XBTF aims to provide capital appreciation by investing in BTC futures and may invest some of its assets in Treasuries and cash.

Instead of directly buying bitcoin, a futures ETF buys bitcoin futures contracts. The New York-based VanEck investment fund has floated several bitcoin ETFs, mainly on European exchanges. Its XBTF fund is the third of its kind launched after October 2019. While most of those funds charge between 1% and 1.5% fees, VanEck has opted to undercut its competition in the US bitcoin futures arena. An ETF is an exchange-traded fund, i.e., an investment fund that tracks the price of an underlying asset.

That means this closed-end fund isn’t open to new investment, but units can be purchased if supported by your broker. Every investment comes with risks, and cryptocurrencies such as Bitcoin have proven to be an extremely volatile asset class. It’s always a good idea to check with a financial advisor before making any investment decision. Even HODLers who plan to stick with the cryptocurrency long term will need to sell portions of their holdings.

As of April 2023, BITS’ holdings were split approximately between CME Bitcoin futures contracts and BKCH. BITI attempts to accomplish this goal by returning the inverse of the S&P CME Bitcoin Futures Index for a single day at a time. The fund maintains its inverse exposure by trading in the cash-settled futures market. In this market, the seller pays the buyer if the price of the futures contract goes up, and the buyer pays the seller when the contract’s price goes down.

On the other hand, the Global X Blockchain & Bitcoin Strategy ETF has a more diversified approach, holding a mix of CME Bitcoin futures contracts and a selection of blockchain stocks. In addition, the ProShares Bitcoin Strategy ETF offers another alternative for investors interested in gaining exposure to Bitcoin futures. In an exchange-traded computer chip stocks fund that tracks stocks, the fund purchases the stocks. These are the fund’s holdings, and the company that bought them offers fractionalized shares on exchanges, which trade nearly 24 hours per day, seven days per week. Brazil got its first Bitcoin ETF in June 2021, launched by Rio asset manager QR Asset Management.