7 Best Bitcoin ETFs of February 2024: Bitcoin is a new type of investment that you can buy and sell through special funds called exchange-traded funds (ETFs). In 2021, ETFs linked to the future value of bitcoin were introduced. However, it wasn’t until January 2024 that U.S. authorities allowed ETFs directly connected to the everyday price changes of bitcoin, which are called spot prices.
To help you understand these new kinds of ETFs, Ruby Currency has reviewed the ones currently available in the United States. Some of these ETFs are directly linked to the current value of bitcoin, while others involve investing in bitcoin’s future value.
What is a Bitcoin ETF?
A bitcoin ETF is like a fund that focuses on investing in bitcoin. It sells shares to investors and uses the money to buy assets, just like how a company sells its stock. ETFs are like mutual funds, but you can buy and sell them on a stock exchange.
Until January 11, because of SEC rules, bitcoin ETFs couldn’t trade bitcoin at its current price. Instead, fund managers had to invest in companies related to bitcoin or cryptocurrency, or in bitcoin futures contracts. Futures are complicated investments for experienced traders.
Now, there are “spot” bitcoin ETFs that give direct bitcoin exposure, but investors have various strategies. Some still prefer futures or other methods to get into bitcoin markets. Before buying a bitcoin ETF, research its structure to understand it fully.
What Are Spot Bitcoin ETFs?
In January, the SEC officially gave the green light to exchange-traded funds (ETFs) connected directly to bitcoin. These “spot” bitcoin ETFs can directly hold the digital currency without any doubts or complexities.
While there have been funds offering indirect exposure in recent years, these new funds allow investors to closely follow the daily changes in bitcoin prices on the spot markets by investing directly.
However, not every new fund will attract enough money from shareholders. This can be very harmful for a fund. For example, if a fund charges 0.30% in annual expenses and only has $50 million in total assets, it would only make $150,000 a year in management fees. That’s not much to cover marketing, regulatory compliance, or other important expenses.
Grayscale Bitcoin Trust
How come Grayscale Bitcoin Trust has been operating since 2013 if the SEC only recently approved funds to work as spot bitcoin ETFs? In the beginning, GBTC wasn’t an ETF.
It was more like a closed-end fund. This meant it didn’t have a smooth way for investors to cash out like ETFs do. So sometimes, the price of GBTC shares was a lot higher or lower than the actual value of the bitcoin they held. Investors didn’t like paying more than bitcoin was worth. Now that the SEC has approved its change to an ETF, GBTC is on the same level as the other ETFs approved by the SEC.
Alternative Bitcoin ETFs
Lately, people are talking a lot about spot bitcoin ETFs. But there are other kinds of ETFs that don’t directly invest in bitcoin, like ones that invest in bitcoin futures. These ETFs aren’t worse; they’re just different strategies to get into bitcoin.
One thing to keep an eye on is that the new spot ETFs are causing some investors to transfer their money from older funds to these new ones. Funds that don’t have enough money under management might struggle to keep running.
Bitcoin ETF Fees
Buying a bitcoin ETF might sometimes cost more than just buying bitcoin directly from a crypto exchange. This is because exchanges usually charge fees for each transaction, while owning a bitcoin ETF means paying a yearly fee.
However, some ETFs currently don’t charge these fees. Also, if you plan to move your bitcoin from the exchange to another digital wallet, you might have to pay small withdrawal fees. So, it’s important to keep these factors in mind when deciding how to invest in bitcoin.
Why Should I Buy a Bitcoin ETF Instead of Bitcoin?
Some investors might feel more secure investing in bitcoin through a managed fund instead of owning the actual digital currency themselves.
Many people worry about the risks associated with storing bitcoin securely, like the possibility of hacking or losing passwords and keys.
Lots of people can sign up for a Coinbase account, but not everyone feels at ease doing it. Some people are limited to using their regular brokerage accounts to buy and sell stocks for different reasons.
A lot of people save money for retirement using an individual retirement account (IRA) or a 401(k) plan. If someone saving for retirement wants a little bit of bitcoin investment without making an account on a crypto exchange or a bitcoin IRA, owning shares of a bitcoin ETF is a good option.
How To Invest in Bitcoin ETFs
To start buying a bitcoin ETF, you first need to open a brokerage account. Nowadays, there are lots of online brokers to choose from.
After you’ve opened your account, you can buy bitcoin ETFs just like you would any other stock or ETF. Usually, you’ll search for the ETF’s symbol in your brokerage account, enter how many shares you want to buy, and click “buy.”
Keep in mind that ETFs have a yearly fee called an expense ratio, which will be taken out of your account.
The Future of Bitcoin ETFs
No one knows what will happen with bitcoin ETFs, which are risky investments. Bitcoin prices have gone up to over $60,000 per coin, but then they fell below $19,000.
Whether cryptocurrencies, especially bitcoin, will be good investments in the long run is something each person must decide for themselves. It’s a good idea to talk to a financial advisor before you make any investment choices.
Disclaimer: The information on this website isn’t meant to be taken as advice for investing money. Investing involves uncertainty, and there’s a chance you could lose your money when you invest.