Home Business News Newly approved Bitcoin ETFs in the US has big fee advantages over old ones

Newly approved Bitcoin ETFs in the US has big fee advantages over old ones

by Thea Coates Finance Reporter
18th Jan 24 9:32 am

On January 10, the Securities and Exchange Commission (SEC) approved 11 “spot “Bitcoin ETFs for trading in the United States.

This is a favorable step for fostering more widespread investment into Bitcoin, the largest cryptocurrency in the world in terms of market capitalization.

A “spot” Bitcoin ETF means the fund can hold actual Bitcoin. This is a major advantage over the prior Bitcoin ETFs that could only own Bitcoin futures. The new spot ETFs can save investors a lot of money in yearly fees.

The original Bitcoin ETFs were introduced in 2021 (and after), but they don’t actually own Bitcoin. Rather these funds own and trade in Bitcoin futures contracts. A Bitcoin futures contract is an agreement to buy or sell Bitcoin at a certain price in the future. These contracts are rolled over into a new contract as they expire since the ETF can’t own/take possession of the actual Bitcoin. Rolling over contracts incurs fees, whereas simply owning Bitcoin does not.

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The SEC didn’t want U.S. Bitcoin ETFs owning actual Bitcoin because of the unregulated nature of the market and the exchanges. The Bitcoin futures market and exchanges are highly regulated within the United States.

They have since had a change of heart as the SEC and other governing bodies have taken steps in recent years to integrate more regulation. Spot ETFs, ones that can own actual Bitcoin, were approved in 2024.

Spot Bitcoin ETFs tend to have lower fees. The ProShares Bitcoin Strategy ETF (BITO), which has been around since 2021 and owns Bitcoin futures, has a 0.95% expense ratio. Many of the new spot Bitcoin ETFs have lower fees, starting at 0.2%.

Cory Mitchell, an analyst with Trading.biz stated “When choosing between similar ETFs that track the same asset, the one with the lowest fee is often best. Over a year or more, compare the performance of various funds and see if this provides additional insight, as some funds track their benchmark better than others.”

Based on this, a low fee is generally best until more time allows for performance to be critiqued as well.

Liquidity is also an issue to consider. Some funds will have less volume and fewer assets under management than others. If an ETF has low volume, that will make it harder to exit large positions without moving the price of the ETF. In this way, low volume can actually be a cost.

New approved spot Bitcoin ETFs and their fees

The newly approved ETFs are ranked from lowest fee to highest. If funds have the same fee, then the one with the highest average volume (so far) is listed first.

Bitwise Bitcoin ETF (BITB)

  • Manage fee: 0.2%
  • Average volume: 4 million

ARK 21Shares Bitcoin ETF (ARKB)

  • Manage fee: 0.21%
  • Average volume: 4.7 million

Blackrock’s iShares Bitcoin Trust (IBIT)

  • Manage fee: 0.25%
  • Average volume: 30.3 million

Fidelity Wise Origin Bitcoin Trust (FBTC)

  • Manage fee: 0.25%
  • Average volume: 14.1 million

VanEck Bitcoin Trust (HODL)

  • Manage fee: 0.25%
  • Average volume: 0.4million

Franklin Bitcoin ETF (EZBC)

  • Manage fee: 0.29%
  • Average volume: 1.5 million

WisdomTree Bitcoin Fund (BTCW)

  • Manage fee: 0.3%
  • Average volume: 0.1 million

Invesco Galaxy Bitcoin ETF (BTCO)

  • Manage fee: 0.39%
  • Average volume: 1 million

Valkyrie Bitcoin Fund (BRRR)

  • Manage fee: 0.49%
  • Average volume: 0.4 million

Hashdex Bitcoin ETF (DEFI)

  • Manage fee: 0.94%
  • Average volume: 0.003 million

Grayscale Bitcoin Trust (GBTC)

  • Manage fee: 1.5%
  • Average volume: 6.9 million

Bitcoin is a volatile asset, and the ETFs that track them are volatile as well. While the ETFs are easy to buy and sell, and the fees on these spot ETFs can be quite low, consider your risk tolerance and investment objectives before investing.

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