Spot Bitcoin ETFs are doing modestly well as inflows rise. The most recent data shows that there are now 5 Bitcoin-related ETFs with over $1 billion in assets. As the industry evolves, it is becoming clear that the sector will be dominated by three key ETFs: Grayscale Bitcoin Trust (GBTC), iShares Bitcoin Trust (IBIT), and Fidelity Wise Origin Bitcoin Fund (FBTC).
The other likely contenders are those offered by Ark Invest (ARKB) and Bitwise (BITB). Therefore, a common question we have received is: which Bitcoin ETF should I buy? This article will look at the three main ones and explain their pros and cons.
Grayscale Bitcoin Trust
Grayscale Bitcoin Trust (GBTC) is the biggest spot Bitcoin ETF in the world with over $20 billion in assets. Its size is primarily because it was in business for a long time before the new ETFs were approved. Back then, it operated as a trust and not an ETF.
Recently, GBTC has come under pressure as many investors dump their assets. The FTX Estate has sold vast amounts of GBTC while Gemini, a crypto lender, has filed to sell some of its assets. This trend will likely continue in the coming years.
Data in its website shows that GBTC has over $20.7 billion in assets. I expect that this amount will continue falling in the coming months. The main reason why GBTC is not a good investment is that it is quite expensive.
ETF providers make money by charging a small fee every year. You will find this fee listed in the form of an expense ratio. Most ETFs have an expense ratio of less than 0.40%. GBTC, on the other hand, charges 1.50%, making it one of the most expensive funds in the world.
This amount matters because, if you invest $10,000 in GBTC, you can expect to pay $150 in fees in the first year. If you hold the amount for 10 years, you will pay $1,500 if Bitcoin price remains intact.
Therefore, it makes no sense, especially for a regular investor to buy GBTC. Besides, you can buy Bitcoin and hold it in a cold wallet and pay no fee.
iShares Bitcoin Trust
The iShares Bitcoin Trust (IBIT) has become the second-biggest spot Bitcoin ETF with over $3.3 billion in assets. It has an expense ratio of 0.25%, making it quite affordable than GBTC.
IBIT has other important features. For example, it is highly liquid, with a 30-day average volume of 15.9 million shares. On Wednesday, the total volume stood at over 7.3 million. It is also backed by Blackrock, a company that manages over $10 trillion in assets.
Therefore, I believe that iShares Bitcoin Trust is a good ETF to buy from a fee, liquidity, and security perspective.
Fidelity Wise Origin Bitcoin ETF
Fidelity Wise Origin Bitcoin ETF (FBTC) is the third-biggest spot Bitcoin ETF with over $2.3 billion in assets, according to its website. All of its assets are invested in Bitcoin, which is then stored in Coinbase custody.
FBTC has a close similarity with IBIT because they both have a similar expense ratio of 0.25%. This means that you should expect to pay a similar amount of fees. They are both housed in large companies, with Fidelity having over $4.3 trillion in assets. FBTC is also trading at a slight premium to NAV, which is a good thing.
Which is the best spot Bitcoin ETF to buy?
Taken together, I believe that Both FBTC and IBIT are good spot Bitcoin ETFs to buy. As mentioned, they have a low expense ratio and they are highly liquid. Other ETFs have a lower expense ratio such as those offered by Bitwise and Ark Invest.
The two will only start charging a fee once they cross $1 billion in assets. The challenge is that these funds are not as liquid as FBTC and IBIT. Still, they are also alternatives that you can explore. Most importantly, there is the better alternative of just buying Bitcoin and holding it in a cold wallet.
