What is a Bitcoin ETF
ETF, which stands for Exchange Traded Funds, is a type of investment fund that allows investors to capitalize on rate changes by buying units in the fund. The fund is comprised of one or more assets, which are selected and managed by the company. The specific volume of units available for purchase is determined by the company, with some companies offering 100% of the units and others offering 75%.
Bitcoin-ETF, on the other hand, is a specific type of exchange-traded fund that exclusively includes Bitcoin (BTC). By buying shares of a Bitcoin-ETF, investors can potentially earn profits from the growth of the cryptocurrency's rate. This means that if the price of Bitcoin increases, the value of the shares in the Bitcoin-ETF will also increase, allowing investors to benefit from the appreciation of the cryptocurrency.
How to trade Bitcoin ETF
Exchange-traded funds (ETFs) offer a convenient way to trade on exchanges, resembling stock investments in several aspects but with notable distinctions. Unlike stocks, which solely represent a single company, ETFs comprise a collection of assets. Moreover, ETFs provide an opportunity to circumvent direct investment by allowing investors to invest in the ETF itself rather than the underlying asset
How to buy Bitcoin ETF
In order to purchase ETF shares, a brokerage account is necessary. The requirements for opening an account may vary depending on the country. Typically, providing the broker with an identification document is sufficient. Once that is done, the next step is to locate the ticker symbol (a shortened designation for the investment instrument) in the provided list and specify the desired shares for purchase.
Fees for Bitcoin ETFs
|Fee (after Waiver)
|Most Recent Filing
|Bitwise Bitcoin ETP Trust (Re-filing)
|6 Months &/or $1 Billion
|ARK 21Shares Bitcoin ETF (Re-filing)
|6 Months &/or $1 Billion
|Invesco Galaxy Bitcoin ETF (Re-filing)
|6 Months &/or $1 Billion
|WisdomTree Bitcoin Trust (Re-filing)
|6 Months &/or $1 Billion
|iShares Bitcoin Trust
|12 Months 8/or $5 Billion
|VanEck Bitcoin Trust (Re-filing)
|Franklin Bitcoin ETF
|Fidelity Wise Origin Bitcoin Trust (Re-filing)
|Valkyrie Bitcoin Fund (Re-filing)
|Hashdex Bitcoin ETF Strategy Change
|Hashdex Bitcoin ETF (Re-file) Conversion
Fees for Bitcoin ETFs are competitive and will continue to rise. Right now, many issuers are offering reduced or even no commissions for the first six months after the ETF's launch. For example, ARK Invest/21Shares and Bitwise offer 0% commission during this period, while Grayscale charges 1.5%. However, after the first six months, some issuers plan to raise commissions to a certain level. For example, ARK Invest/21Shares will increase fees to 0.21% and Invesco Galaxy Bitcoin ETF to 0.39%.
Some other fees for spot Bitcoin ETFs also vary. For example, VanEck Bitcoin Trust offers a 0.25% commission, while Franklin Bitcoin ETF offers a 0.29% commission. However, some issuers, such as Fidelity Wise Origin Bitcoin Trust and WisdomTree Bitcoin Trust, offer 0% commission after a certain period of time.
Invesco's Galaxy Bitcoin ETF offers a reduced commission for the first six months and the first $5 billion of assets, and then raises it to 0.39%. This could be attractive to investors as they will be able to take advantage of the lower commission during the initial period.
The approved spot bitcoin ETFs are ARK 21shares Bitcoin ETF (ARKB), Fidelity Wise Origin Bitcoin Fund (FBTC), Franklin Bitcoin ETF (EZBC), Invesco Galaxy Bitcoin ETF (BTCO), Vaneck Bitcoin Trust (HODL), Wisdomtree Bitcoin Fund (BTCW), Bitwise Bitcoin Trust (BITB), Ishares Bitcoin Trust (IBIT), Valkyrie Bitcoin Fund (BRRR), Hashdex Bitcoin ETF (DEFI), and Grayscale Bitcoin Trust (GBTC).
On Wednesday Jan. 10, 2024, the U.S. Securities and Exchange Commission (SEC) revealed its approval of 11 applications for spot bitcoin exchange-traded funds (ETFs) to be listed and traded on NYSE Arca, the Nasdaq Stock Market, and Cboe BZX Exchange.
Bitcoin ETFs charts
ETFs solve two major problems:
ETFs are a legally compliant product. This means that even if the ETF includes cryptocurrencies, investors are technically investing in the fund itself, rather than directly in the coins. This ensures that the investment remains within the boundaries of the law.
Familiar and understandable
Investing in ETFs is a common practice for large corporations with conservative investment strategies. These companies often prefer regulated investment vehicles that offer stability and security. Therefore, cryptocurrency-based ETFs can be an attractive option for such companies, as they allow for exposure to the potential benefits of cryptocurrencies while adhering to their investment preferences.
There are two types of cryptocurrency ETFs: spot and derivative.
Spot cryptocurrency ETFs involve investing in a fund that directly holds cryptocurrencies. When an investor purchases a share of this fund, they essentially own a portion of the cryptocurrency assets held by the fund. For instance, if the fund holds Bitcoin, Ethereum, and Litecoin, the investor's sharerepresents their ownership in these cryptocurrencies.
Derivative cryptocurrency ETFs involve investing in a fund that holds cryptocurrency derivatives. Derivatives are financial instruments that derive their value from an underlying asset, in this case, cryptocurrencies. For example, the fund may hold futures contracts on Bitcoin. When an investor purchases a share of this fund, they are essentially investing in these futures contracts, which have predetermined terms such as completion date and settlement price.
Why the Bitcoin-ETF has been on the radar
The bitcoin-ETF has been in the spotlight due to these reasons. Firstly, many companies are unable to invest in digital assets and make money from them because cryptocurrency is not legal in their country. This restriction prevents companies from diversifying their investment portfolios and potentially benefiting from the growth of the crypto market.
Secondly, even in countries where cryptocurrency is legal, the conservative investment strategies of many organizations pose a challenge. Typically, investment decisions are made by the board of directors, who may not be familiar with or interested in the crypto industry. As a result, the likelihood of these organizations investing in cryptocurrency with their available funds is very low, as they may prefer more traditional investment options.
The bitcoin-ETF, or exchange-traded fund, is seen as a potential solution to these issues. An ETF is a financial product that allows investors to gain exposure to a specific asset, in this case, bitcoin, without having to directly buy, hold, and manage the cryptocurrency themselves. It offers a more regulated and familiar investment vehicle for companies and investors who are interested in the crypto market but face legal or strategic barriers.
The spotlight on the bitcoin-ETF is driven by the potential for increased accessibility and legitimacy of cryptocurrency investments. If approved and implemented, it could open up new avenues for companies and individuals to participate in the crypto market, potentially leading to increased adoption and mainstream acceptance of digital assets.
Investors worldwide have been captivated by the introduction of cryptocurrency ETFs in the United States, given its status as the largest global economy. However, the journey for spot bitcoin ETFs has been far from smooth.
The Complex History of Bitcoin ETFs in America
- A cryptocurrency ETF, as we have learned, is a convenient tool that simplifies the entry of large investors into the crypto market, and there is no better place to launch it than the financial center of the world - America. Over the past few years, American companies have been trying to create one. The problem is that approval from the U.S. Securities and Exchange Commission (SEC) is required to launch it.
- The first wave of attempts by companies to launch a cryptocurrency ETF occurred from 2017 to 2020. During this time, the SEC was led by Commissioner Jay Clayton, and no company received approval.
- In April 2021, Gary Gensler took over as the head of the SEC. Market participants viewed this with optimism, as Gensler was considered a crypto enthusiast due to his lectures on cryptocurrency at the Massachusetts Institute of Technology. Many began to speculate that the market would finally see cryptocurrency ETFs. This turned out to be partly true.
- After the change in SEC leadership, applications for launching cryptocurrency ETFs started to be received again. Most companies wanted to create a fund based on Bitcoin. Unfortunately, Gary Gensler continued the tradition of his predecessor - he began rejecting the applications.
- In September 2021, Gensler commented on the situation, stating that creating such an instrument based on Bitcoin could be risky because the status of the instrument in the financial market is not yet fully defined. Gensler pointed to an alternative - Bitcoin futures ETFs.
- A futures contract is an agreement whereby the seller agrees to deliver a specified asset to the buyer at a predetermined price and within a predetermined period. Bitcoin futures have been traded on the Chicago Mercantile Exchange since December 2017. Gensler argued that futures, unlike "pure" spot Bitcoin, are fully legal and registered instruments in compliance with regulatory requirements.
- Market participants listened to Gensler, and in October 2021, a Bitcoin futures ETF called BITO was launched by ProShares. Others followed suit: in April 2022, the SEC approved an application for such an instrument from the exchange-traded fund provider, Teucrium.