After a long and exhausting crypto winter, Bitcoin finally climbed back above its previous all-time high of $69,000. Bitcoin bulls might be charging forward in anticipation of one of the most important events for cryptocurrency investors: the Bitcoin halving.
But the halving is not the only ace up investors’ sleeves. A new wave of Bitcoin spot ETFs boasting a whopping $57 billion of assets under management is also opening the floodgates to an entirely new pool of capital.
As someone who has endured a fair number of crypto winters, I couldn’t pass up the opportunity to dive into the novel world of crypto ETFs. I wanted to find out what they could do for the next crypto spring and whether or not they were worthy of my watchlist.
So, I went deep into research and studied all ten Bitcoin spot ETFs. I discovered a few interesting alternatives to them and came up with a list of what I believe are the best ones worth watching during the next halving in 2024.
What Is a Bitcoin Spot ETF?
A Bitcoin spot ETF is an exchange-traded fund that tracks the digital currency’s performance by holding it as an asset. Unlike stock ETFs, which are composed of a basket of stocks, a Bitcoin spot ETF offers exposure to a single investment.
Put simply, it’s a more convenient way for you, as an investor, to gain exposure to Bitcoin, except you don’t need to own or hold custody of the digital currency directly.
There are several reasons why a Bitcoin spot ETF makes more sense than owning the asset outright, such as:
- The convenience of safeguarding your Bitcoin with a reputable custodian
- Not having to pay for gas fees when you transact Bitcoin
- Not needing to manage a digital wallet
- Tax advantages like adding Bitcoin to your 401k and IRA
- Ease of accounting provided by your trusted stock and ETF broker
However, it’s not all butterflies and rainbows. Bitcoin spot ETFs have downsides, such as the ETF’s expense fees and third-party custodianship risks.
Bitcoin spot ETFs work similarly to metal ETFs. A good example is the SPDR Gold Trust (GLD), which aims to reflect gold’s performance by storing physical bullion in secure vaults.
As of the time of this writing, there are ten Bitcoin spot ETFs. All were recently approved by the Securities and Exchange Commission (SEC).
What Will Happen When Bitcoin Halves in 2024?
A Bitcoin halving is an event during which the reward for mining a new block of the digital currency is halved. That means that essentially, after each halving event, it becomes more difficult and less profitable to mine a Bitcoin.
In other words, miners get rewarded less for their energy consumption and processing power. This also results in decreasing supply as bitcoins are introduced to the market at a slower pace. In the past, the event has been associated with bull runs due to how it affects the mechanics of supply and demand.
Bitcoin halvings occur roughly every four years, with the next one expected to happen sometime in April 2024. There have been three halvings in the past: one in 2012, another in 2016, and the last one in 2020.
A Bitcoin bull run has followed each previous halving. However, the increase in Bitcoin’s price does not always manifest immediately after the halving event. This lag is generally attributed to the time it takes for the supply effect to permeate the market.
However, in anticipation of the upcoming halving, investors have rushed to enter the trade early, driving the price of Bitcoin above its all-time highs ahead of schedule.
The cryptocurrency market is complex and volatile. Therefore, it’s not a given that the surge will continue after the halving. However, Bitcoin’s price performance appears to suggest that investors might be banking on it.
Best Crypto ETFs To Buy In April 2024
Grayscale Bitcoin Trust ETF (GBTC)
The Grayscale Bitcoin ETF leads the scoreboard as the largest BTC spot ETF by market cap, with about $24 billion worth of capital. However, the world’s largest Bitcoin ETF is also the most expensive. As of the time of this writing, holding GBTC in your portfolio will cost you 1.50% in fees.
I like the Grayscale ETF because of its long-standing position on the market. The SEC approved the ETF application in January 2024, but GBTC is much older. The ETF has been available in the over-the-counter markets since 2013.
While its size might be an advantage in terms of spreads and liquidity, its high expense ratios will impact your returns over time. As cheaper options enter the market, the largest Bitcoin Spot ETF might lose its charm and its size.
ETFs that track metals follow a similar practice. Typically, metal funds hire a vault custodian who specializes in storage and security to house the metals for them. This allows the fund manager to focus on finance, which is what they’re skilled at and lets the custodians with expertise in security and safekeeping handle the storage of the assets.
Coinbase is listed as the crypto custodian for Grayscale Bitcoin Trust ETF. Essentially, that means that they don’t actually hold the Bitcoin they manage in their digital wallets. Instead, Coinbase holds it for them.
This practice is not uncommon. In fact, most Bitcoin spot ETF providers don’t actually hold Bitcoin. Coinbase is one of the most widely-recognized crypto brokers in the United States.
iShares Bitcoin Trust (IBIT)
The iShares Bitcoin Trust is BlackRock’s take on a Bitcoin spot ETF. With $17 billion in net assets, it is one of the largest ETFs on the market after GBTC.
It’s truly rare to talk about themed ETFs these days without mentioning BlackRock. Their influence extends far and wide, reaching nearly every imaginable sector of the economy. The American multinational investment company is one of the largest asset managers in the world, with close to $10 trillion under management. This is part of what makes IBIT so appealing.
If that wasn’t enough to pique your attention, an attractive expense fee might. Holding IBIT costs only 0.25%. The fund’s fee is much lower than GBTC and is more consistent with the industry average.
In a strategic move to make the ETF more attractive, BlackRock offered to waive a portion of its fee from January 2024 to 0.12% for 12 months if the trust’s assets remained below $5 billion. The discount proved effective, given that the ETF has since doubled the discount limit. Like Grayscale, iShares also uses Coinbase as its trusted Bitcoin custodian.
Fidelity Wise Origin Bitcoin Fund (BATS: FBTC)
FBTC is a Bitcoin spot ETF managed by Fidelity Investments, one of the world’s largest asset managers. The investment firm currently controls close to $5 trillion in discretionary assets, making it a major force in the space.
What stands out the most about the Fidelity fund is that this is the only self-custodian Bitcoin ETF available on the market. That can be either a good or a bad thing, depending on what you consider to be more risky.
In one sense, it protects the fund against any risks Coinbase may face, such as threats like cybersecurity attacks or fund mismanagement, as was the case with FTX.
In contrast, Fidelity could also be exposed to cybersecurity threats. However, given that Fidelity’s business is not 100% reliant on crypto, the brokerage might be able to handle the situation better than Coinbase.
Fidelity’s Bitcoin fund management fee is in line with most other Bitcoin spot ETFs. The asset manager charges investors a fair 0.25% rate to maintain it.
Ark 21 Shares Bitcoin ETF (ARKB)
ARKB is a Bitcoin spot ETF operated by ARK Investments, which is the third-cheapest Bitcoin spot ETF on the market. Its expense ratio of 0.21% is around 0.04% lower than the average and only 0.02% more pricey than the most economical option available today.
I like ARKB better than the two lowest-cost alternatives for two compelling reasons. The first is that it has significantly more assets under management than the cheapest Bitcoin spot ETF on the market.
The most affordable Bitcoin spot ETF currently available is the Franklin Bitcoin ETF (EZBC). The fund’s expense ratio is 0.19%, which is 0.02% lower than the cost of holding ARKB.
But EZBC is also significantly smaller, nearly one-tenth of ARKB’s size, to be precise. The Franklin Bitcoin ETF has a mere $312 million in assets under management, while ARKB boasts over $2.85 billion.
Having more assets under management is better for several reasons. First, it benefits liquidity, as it typically means higher trading volumes. This makes it easier for investors to buy and sell shares. Second, larger assets under management (AUMs) typically mean tighter bid-ask spreads, which helps reduce transaction costs when buying and selling shares.
The second reason I like ARKB is that it has the backing of Cathie Wood’s ARK Investments. While Cathie’s credibility, along with the rest of the ARK funds, has taken a dive during the bear market, their reputation for innovation and Fintech insights is still very appealing.
Bitwise Web3 ETF (NYSEARCA: BWEB)
Unlike the other ETFs on this list, BWEB holds no actual crypto. Instead, BWEB is composed of a basket of stocks that offer exposure to Web3—a blockchain segment focused on the future of the internet.
The ETF’s top assets include shares of companies like Coinbase Global (COIN), Meta Platforms (META), Roblox Corp (RBLX), Marathon Digital Holdings (MARA), and Block (SQ).
For those with a lower risk tolerance, this ETF can be more appealing than Bitcoin spot ETFs. Stock ETFs are more diversified, which reduces their volatility, but Bitcoin carries a greater risk than stocks. Therefore, a Bitcoin spot ETF is exponentially more volatile than BWEB.
However, as with most investments, higher risk usually means higher returns. Opting for a less volatile ETF could come at the expense of sacrificing profits.
BWEB also comes at a higher cost with an expense ratio of 0.85%. However, the higher price tag might be worth its cost. So far, BWEB has performed quite admirably. The ETF is up more than 80% since its inception back in October 2022.
Fidelity Crypto Industry and Digital Payments ETF (NASDAQ: FDIG)
FDIG is another stock-based ETF aimed at offering exposure to the crypto industry. The ETF tracks the performance of the Fidelity Crypto Industry and Digital Payments Index.
However, FDIG differs from BWEB in that it focuses on digital payments instead of themes like Web3 or the Metaverse. That translates to having more weight towards holdings like Coinbase Global (COIN), Marathon Digital Holdings (MARA), and Riot Platforms Inc (RIOT) instead of focusing on companies like Meta Platforms (META) and Roblox Corp (RBLX).
FDIG charges a lower expense rate than BWEB, setting investors back only 0.39%. However, the fund’s performance hasn’t been exactly appealing. It is only up 3.8% on the year, close to ten times less than BWEB. The performance difference might mainly come from Meta, which has been one of the best performers since the 2022 market bottom.
Siren Nasdaq NexGen Economy ETF (NASDAQ: BLCN)
BLCN is an ETF that invests in companies focused on developing, researching, or utilizing blockchain technology by tracking the investment returns of the NASDAQ Blockchain Economy Index.
The one thing that stood out to me about BLCN is that, out of all the stock ETFs on this list, this might be the one with the most potential to react to Bitcoin’s price surges. That’s because the other stock ETFs on this list did not place so much weight on MicroStrategy Inc (MSTR).
MicroStrategy provides business intelligence (BI) software, mobile applications, and cloud computing solutions. However, its value to the fund might not be entirely based on its core business but instead on the significance of its cryptocurrency holdings.
As of this writing, the technology company founded by Michael Saylor owns a whopping 214,246 bitcoins worth approximately $14.5 billion. That makes the market value of MSTR shares highly correlated with Bitcoin’s performance.
MSTR accounts for approximately 6.66% of the ETF’s overall holdings, making BLCN much more susceptible to a soaring Bitcoin halve than other ETFs on our list.
In fact, the correlation between Bitcoin and Microstrategy prices and its effects on BLCN is already evident. MSTR shares have rallied along with Bitcoin, soaring by more than 160% over the last two months and nearly 500% over the past 12 months.
This magnificent performance is probably what has helped BLCN shares rise higher than other stock ETFs on our list.
While the ETF is a long way from its $53 high, its price has climbed aggressively over the past few months. Shares of the ETF are now 50% higher than they were in November and showing no signs of fatigue, making BLCN an attractive ETF to consider holding through the Bitcoin halving.
Is Owning a Bitcoin ETF the Same as Owning Bitcoin?
Owning a Bitcoin spot ETF is not the same as holding Bitcoin directly, but it’s similar. A Bitcoin spot ETF provides equivalent exposure to owning the digital currency outright. In other words, if Bitcoin’s value increases, so will your ETF’s value, and vice versa.
However, when you own a spot bitcoin ETF, you don’t have direct access to the cryptocurrency. Instead, you hold shares in a fund that invests in Bitcoin.
How To Buy a Crypto ETF
The most convenient way to purchase a crypto ETF is to buy shares directly from your preferred broker. Most established brokers and retirement accounts offer crypto and Bitcoin spot ETFs as part of their asset portfolios, just like any other ETF or stock.
Are Crypto ETFs Worth Buying?
As the leading asset in the crypto market, Bitcoin tends to affect the performance of other cryptocurrencies in the space. The same goes for stocks that are correlated with the blockchain sector, like Coinbase Global Inc (COIN).
While the Bitcoin halving event could affect the entire sector, it’s unlikely that every crypto and crypto company will perform the same way. Some companies—and some cryptocurrencies—will deliver better percentage gains than others, and some could miss the run altogether.
In a sector plagued with so much controversy and so much volatility, it could be a good idea for investors to seek ways to minimize their risk. Investing in a crypto ETF could help deliver the diversification, convenience, and safety that investors seek.
Now that you know more about the different options available, you might want to add one or more of these to your Bitcoin halving watch list.
The post Rev Up Your Crypto Game: Top 7 ETFs for the 2024 Bitcoin Halving! first appeared on Wealth of Geeks.
