Best Bitcoin ETFs: Top Funds For Buying Bitcoin

Bitcoin’s price was already rising in the weeks leading up to the spot bitcoin ETF announcement—and a “sell the news” moment what is crypto etf happened in the wake of the approval. Many bitcoin holders became sellers, with the price of bitcoin dropping over 10% in just a few weeks. INX.one provides a gateway to explore security token trading, cryptocurrency trading, and primary market offerings in a regulated and secure platform. Our educational resources are also a great way to stay abreast of market developments and regulatory changes. Buying a Bitcoin ETF is like buying Bitcoin, except you do not own the actual cryptocurrency. What you own is a share in the Bitcoin ETF that directly correlates with the actual price of Bitcoin on the cryptocurrency exchange market.

What are cryptocurrency exchange-traded funds (ETFs)?

These are financial tools that represent agreements between traders to trade assets at a certain price at a pre-defined date, and the fund rolls the futures contracts over as they expire. Though the price of Bitcoin affects the value of shares of these ETFs, it often does so more unpredictably, a concept known as “tracking error”. Bonds.“Bonds” shall refer to corporate debt securities and U.S. government securities offered on the Public platform through a self-directed brokerage account held at Public Investing and custodied at Apex Clearing. The value https://www.xcritical.com/ of Bonds fluctuate and any investments sold prior to maturity may result in gain or loss of principal.

How are Bitcoin ETFs different from traditional ETFs?

Almost 4% of the entire supply of Bitcoin was held by Bitcoin ETFs by early March, with spot Bitcoin ETFs hitting $50 billion in AUM—more than half the value of AUM held by gold-backed ETFs. 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. Bitcoin ETFs track the current price of Bitcoin, and should act in lockstep with Bitcoin’s price swings. Upgrading to a paid membership gives you access to our extensive collection of plug-and-play Templates designed to power your performance—as well as CFI’s full course catalog and accredited Certification Programs.

Mainstream Adoption: The Era of Bitcoin ETFs Begins

This can happen for several reasons such as management fees, transaction costs, or logistic issues in replicating prices of a security. This means that the value of the ETF may, at times, not directly match the actual current exact value of Bitcoin at any given moment. Perhaps most importantly, ETFs are much better understood across the investment world than cryptocurrencies.

Private Clients and Businesses Are Flocking to Relai for Bitcoin Investments

However, wallets and exchanges can be hacked and keys stolen—which means your cryptocurrency can be stolen. You can store your keys offline using several methods, but none of these methods are 100% secure or guaranteed. The SEC previously rejected several applications for a spot Bitcoin ETF by Grayscale Investments, a leading digital asset manager. In August 2023, a federal appeals court ruled that the SEC was wrong to reject Grayscale’s application and had not sufficiently explained its reasoning. Below are the advantages that investors are thought to have from spot Bitcoin ETFs. “Investors should approach cautiously and look at previous price movements of bitcoin to make sure they can stomach the volatility before they dive in,” says Christopher Johns, founder and wealth advisor at Spark Wealth Advisors, LLC.

Futures ETF (index or futures-based ETFs):

Unlike a stock, which is backed by the assets and cash flow of an underlying business, Bitcoin and most other cryptocurrencies rely solely on traders’ expectations to prop up their prices. It’s what investing experts call the “greater fool theory of investing,” since traders make money only by selling to someone else who is more optimistic about the cryptocurrency’s price potential. Spot bitcoin ETFs own bitcoin equivalent to the market capitalization of that particular ETF, while bitcoin futures ETFs hold bitcoin futures contracts based on the potential future price of bitcoin. Spot ETFs are a much bigger deal as they can lead to more adoption and demand for bitcoin itself, while bitcoin futures ETFs are more of a speculative bet on the future price of bitcoin. These shares are priced to reflect the current spot price of bitcoin and can be traded on traditional stock exchanges. Exchange-traded funds (ETFs) are investment funds traded on stock exchanges, similar to individual stocks.

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

That being said, these five ETFs are off to a running start, and the sixth-largest fund was worth less than $300 million at the time of writing. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation.

No, spot Bitcoin ETFs do not pay dividends, as Bitcoins do not generate any income. The investment value of spot Bitcoin ETFs is derived mainly from the appreciation (or depreciation) in the price of Bitcoins. Investors should be aware that the primary aim of investing in a spot bitcoin ETF is capital appreciation from bitcoin’s price moves, not income from dividends. The market is kept liquid and efficient by market makers who continuously offer to buy and sell shares of the ETF. Their activity is crucial in maintaining a stable market, ensuring that investors can easily buy or sell shares of the ETF when needed.

• Individual investors can already invest in bitcoin and as many as 13% of Americans have invested in crypto so far in 2021 according to one University of Chicago study.
• Just as Bitcoin was the first cryptocurrency, it was also the first coin to gain traction as the subject of an ETF.
• The intersection of these two areas through Bitcoin ETFs is a significant step toward the mainstream adoption of digital currencies.
• Of course, the existence of a cheaper and easier way to trade Bitcoin doesn’t make the digital coin a buy, only cheaper and easier to do so.
• Blackrock, the massive investment manager, knows how to attract assets to their funds.

Spot Bitcoin ETFs: Pros And Cons

For example, A Bitcoin ETF could comprise Bitcoin, Apple stocks, Facebook stocks, and more—providing investors with the opportunity to mitigate risk and diversify their portfolio. Similarly, by trading on a regulated market exchange, a Bitcoin ETF would provide investors with the chance to diversify their existing equity portfolios. Tracking error refers to the discrepancy between the performance of the ETF and the actual price movement of the underlying Bitcoin futures.

For retail investors, Bitcoin ETFs are less relevant as an investment product, since they typically involve management fees, which are not incurred with a self-managed wallet, like the one offered by Relai. Nevertheless, all Bitcoin holders probably benefit from the increased acceptance of Bitcoin. Whether this is reflected in the Bitcoin price in the short term is debatable. In the long term, however, as with the Gold ETF, it is assumed that this additional investment channel will continuously attract larger amounts of capital. This means that BlackRock buys and holds real bitcoins for clients who invest in the Bitcoin ETF.

These newly-created shares are then introduced to the listed secondary market, where they can be bought and sold. Please note that an investment in crypto assets carries risks in addition to the opportunities described above. The first concept for an ETF that held Bitcoin (not Bitcoin futures) emerged shortly after investors and brokers noticed that Bitcoin prices were trending upward and gaining popularity amongst investors. In the case of managed commodity futures funds, there is the management of the subsidiary commodity pool to consider as well as the management of the parent investment company. Leverage created by futures contracts can significantly amplify both gains and losses. A few funds may eventually become dominant and be able to lower their fees still more, and so draw in more investors, enabling them to lower prices even further and become more dominant.

If the ETF shares trade at a premium or a discount to the actual price of Bitcoins, then the APs create or redeem ETF shares in large blocks. This means they essentially arbitrage the difference so the ETF share price aligns with the cost of Bitcoins. Futures are complex derivatives instruments that track potential future prices of the underlying asset. This is in contrast to bitcoin futures ETFs, which were approved for trading by the U.S. Securities and Exchange Commission in October 2021 and can only trade bitcoin futures.

As Bitcoin continues to reshape the financial landscape, Bitcoin ETFs offer investors a more familiar and regulated path to gain exposure to this digital asset. From the first global listing of a Bitcoin ETF in Canada to the launch of innovative products like the ProShares Bitcoin Strategy ETF in the U.S., these funds are carving out new opportunities in the investment world. Understanding their workings and implications is essential for any confident investor looking to navigate the ever-evolving cryptocurrency market. Moreover, some Singapore brokerages only allow eligible investors who have the requisite knowledge and experience to trade in U.S. listed spot Bitcoin ETFs. Bitcoin ETFs are classified as Specified Investment Products (“SIPs”)¹ by the MAS which are financial products that have features and risks that are more difficult for retail investors to understand. Financial intermediaries like brokerage firms must assess if the retail investor has the relevant knowledge and experience before opening an account for him to trade the SIP.